Images not rendering using Media Library

What exactly is shown on the "source" view in CKEditor on the node you showed above?

On the source it is showing as

But when we save and look on the page, the src attribute on the img tag is "sites/files/blank.gif"

"blank.gif" doesn't appear in Drupal Core's source code. Are there additional media or image-related modules installed on the site? Were there any errors or difficulties upgrading? Are any patches installed?

There is no patches added related to the media or image.

Modules

Media
Media Library
Image
Blazy UI (Latest version)

If you export the entire site configuration, does "blank.gif" appear in those files? If so, which file?

That is from custom theme twig file.

themes->custom->theme_name->templates->system->image.html.twig

{#
/**
 * @file
 * Theme override of an image.
 *
 * Available variables:
 * - attributes: HTML attributes for the img tag.
 * - style_name: (optional) The name of the image style applied.
 *
 * @see template_preprocess_image()
 */
#}
<img{{ attributes }} class="lazyload" src="/sites/files/blank.gif" data-src="{{datasrc}}" />

So your lazy load implementation probably broke or is missing. Are there browser console errors?

You can try deleting that theme file. Lazy load is built in to Drupal image tags now.

By deleting the twig file on the theme,  broke the site.

We updated the twig file, and the issue got fixed.

Thanks for the prompt response and your help.