I think these tiers are made to offset the potential inflation of players getting into Diamond+. Afterall, you could keep increasing how many tiers there are between Diamond and Challenger, but that also opens windows for more players from Diamond 4 to move up to a rank they may or may not have been eligible to be in simply because more headroom was allowed by opening up, GrandMasters per se, allowing 100 players, potentially, to move forward from Masters, then Diamond I into Masters, then Diamond II in I, III into II, IV into III, and so on, without effort.
Having Iron more or less negates this potential flow and forces players into claiming their spots into Grandmasters, etc.
I could be wrong of course. That's just my theory on why Iron has to exist.