Why disavow spammy domains?

In a nutshell, Google views unnatural and/or irrelevant backlinks to be a sign that a website may have been trying to manipulate Google rankings by participating in link-building schemes.

Why are spammy backlinks bad?

According to Google:

https://developers.google.com/search/docs/advanced/guidelines/link-schemes

“Any links intended to manipulate PageRank or a site's ranking in Google search results may be considered part of a link scheme and a violation of Google's Webmaster Guidelines. This includes any behavior that manipulates links to your site or outgoing links from your site.”

“Additionally, creating links that weren't editorially placed or vouched for by the site's owner on a page, otherwise known as unnatural links, can be considered a violation of our guidelines.”

Can disavowing backlinks hurt?

Google says it’s usually not necessary:

https://support.google.com/webmasters/answer/2648487?hl=en

iQuanti POV:

In terms of removing large quantities of spammy sites at once - there aren’t any drawbacks in disavowing in bulk if you’re sure they are spammy sites.

At iQuanti, we are very diligent in our spammy domain disavowing, and have been consistently doing it on a monthly basis for our clients. Probably the best way to think about it is that we are removing a negative. Subtracting a negative results in a positive.

Also, while Google claims that they simply ignore spammy links, and that spammy links do no harm, Google still hands out manual penalties for unnatural links, and the disavowal tool is part of getting out of a manual penalty, so clearly spammy links are still viewed as a material problem by Google, so the risk of having spammy inks is greater than zero. By preemptively disavowing our known spammy links, we ensure that we stay very far from the spammy link danger zone.

Additional information:

https://developers.google.com/search/docs/advanced/guidelines/link-schemes?hl=en