The short answer is dumping medals gets you better matchups or some can argue fairer matchups, depending on your situation. That said, here's the long answer and basics on medal dumping, and why some players do it. You will also see terms like sandbagging, mini bases, micro bases, etc. All methods of either leveling the playing field or gaining an advantage over your opponents, driven by various reasons like competing in conflicts, playing time considerations, what your base is for (main base vs. secondary base), etc. Weighing out why you play the game is critical. Is it the PvP challenge or the conflict challenge?
Important Note - The game changes drastically at level 8. Sandbagging allows you to level up, find out what it's like playing at level 8, and then add turrets and other base score altering structures while you learn and grow as a player. There's no undo button, so any base building mistakes you make at level 1 through 7, will stay with you at level 8 or higher.
Matchmaking PvP/H2H (Player vs Player aka Head to Head) or War Matchmaking:
At the heart of the current matchmaking issue, is matchups are based on defensive potential more so than offensive potential. Problematic at best, completely unfair at worst. Both PvP and War Matchmaking is based on base score, and PvP definitely factors in medal count. I am not sure to what degree medal count is factored into the war matchmaking algorithm. You will notice the opponent base score and medal levels to some degree, when you attack an opponent. Pay attention to their player rank, medals that you can earn or lose against them, and the related conflict points gain/loss vs. that opponent. You will see those numbers rise (low and high range) as your base score and medal count go up. You will see a corresponding drop, if you dump medals. There are other considerations, for example dev bases, that may muddy the waters. That said, you will notice the changes.
How Base Score and medals impact matchups:
There's a range of typical base scores, e.g. 400 for a level 4, 600 for a level 6, 2500 for a level 9, 2800 for a level 10, 3000+ for a level 11/Prestige. You typically get matched up with players of similar base scores and medal counts, but that is clouded by the opponent pool. If the matchmaking can't find a similar match, it may expand the matchmaking to higher or lower level opponents or go to a fallback solution using dev bases (developer bases, which are stripped down versions of cloned player bases). Medals work in a similar fashion, as the more medals you gain, the more the programming assumes you are skilled and/or have been playing for a long time.
Knowing this, you can game the matchmaking algorithm by either suppressing your base score and/or medal count or true up the matchmaking when you are encountering matchmaking algorithm flaws. Making it seem like you have a lower level base and/or are an inexperienced player. There are abuses there, so I get why some players complain about it, but there's also reasons why it makes more sense to use your knowledge to compete in conflicts and events. The work smarter not harder theory.
Base Score Chart ... See link (Somewhat outdated, but still applicable for the most part).viewtopic.php?t=18532
KSOD publishes squad and player rankings for all squads participating in wars. It gives you an idea of the base scores for players at your HQ level, and the sandbaggers will jump out. For example a base score of 400 would typically be more of a level 4-5 player, and you will see players at level 6 or higher with 400 level base scores.
Squad Rankings (Courtesy of KSOD)http://ksod.us/squadranking
Reasons why you might want to medal dump or use a mini base:
1) You want to compete in conflicts and events, but you also want to have a life beyond the game. Sandbagging either through some combination of mini base designs and medal dumping will allow you to compete with half the time and effort or less. This applies to lower level players as well as to higher level players who have so many medals, they only face maxed out bases, which can take them out of conflicts/events and also take some of the fun out of the game. There's very little fun in only being able to attack once every 2 hours or so, if you need to use the entire arsenal to win.
2) You are a first year player facing players who have played for 2 to 4 years or more. Players complain about sandbaggers but they don't consider how unfair it is to compete with players possessing armory levels way below theirs. It's just the flip side of the coin. Each armory level is worth slightly more than an HQ level, assuming each base is maxed out. A level 8 with a max level armory is like a level 11, so they are a level 11 beating up on level 8's or lower. Isn't that the same as a sandbagger with a level 8 HQ beating level 6 or 7 opponents? Not saying either situation is right, but I can't see how this is not basically the same. The players with maxed out armories grumbling about why players don't play by rules that favors them, makes no sense to me. My take is do what you need to do to compete, have fun, and hopefully both.
3) You enjoy winning and being able to use all your units. As you level up, you will find some units lose value. They become obsolete, because the game must naturally encourage crystal spending, which in turn means the game always needs to sell you the shiny new toy. If you like using wookiees and banthas, and other similar units, keeping your base score and medal count low, will allow you to mix and match based on fun vs. having to use specific units like jets/jumps, because that is what they game is forcing you to do at high levels because of the unit damage/health specs and conflicts and matchmaking algorithms.
4) You are setting up a third, fourth, fifth, etc. base, to help supply units to squad members or your main base, without messing up your main base transport load out. You want to compete in conflicts to gain special units, which require you to compete in conflicts and events. You can do so at a reasonable time cost, using a mini base or by dumping medals.
5) You are not getting enough defensive wins, not because your defense is not great, but because it's become too difficult for attackers on some planets. That means having to earn more attack wins, more time investment, etc. to complete in conflicts.
6) Dev bases. The dev bases are developer bases. There's no armory and no squad center troops. A majority of players feast on dev bases to compete in conflicts. I would prefer attacking real bases, even if they are lower level, since more than likely those bases are still better or more fun to attack than defenseless dev bases. I see some grumbling about dev bases, but way more regarding sandbaggers. Why? The same reasoning drives sandbagging as attacking dev bases. Competing in conflicts and events with a practical amount of time and effort, matchmaking flaws, faction imbalances, and smaller player pools at higher levels.
There's more, but it all comes down to how long you have been playing, if it's a primary vs. secondary base, how much of a time commitment you can make to the game, whether you want to compete in conflicts and events, your skill level, what you consider a level playing field, how much of an enjoyment you get from being able to use the full breath of units available, etc.
Info overload, but I hope this helps, since it's not a simple answer. I have five different reasons for just my five bases alone.