Vinegar is a Safari extension that replaces the YouTube player with a minimal HTML video tag.
It removes ads, restores picture-in-picture, and allows videos to play in the background when set to audio-only quality.
Note: The phrase 'can read and alter webpages' in the permissions section is just an unfortunate choice of words. Vinegar needs access to the webpage to find the YouTube player and replace it. It's not doing anything creepy!
(Also, do check out Vinegar's companion app, Baking Soda. It's essentially a less powerful version of Vinegar, but it works on all websites except YouTube.)
Only tried it for a few minutes, but seems to work as advertised, and I’ll probably start recommending it to friends as a must-have.
I would like to make one feature request though; can you make it switch back to full screen automatically when I’m watching a playlist in full screen and the next video starts?
If so then this extension will be pretty much perfect, and I’ll update my rating to 5 stars once implemented.