I solved a lot of performance issues I had with yt playback by disabling Ambient Mode (it's hidden under cog menu in the player). No clue why, but it was causing massve CPU usage.
I'm not sure why, but ambient mode also introduces a lot of color banding for me. I find it odd because it doesn't occur in similar dark-gradient scenes while gaming, just YouTube.
My guess is that it's supposed to look good if you have HDR enabled (which gives you 10 bits per color channel, although even with HDR, the desktop UI still renders in 8 bits per channel).
But still, it looks terrible for most people, and is a complete waste of resources. Because of the horrible banding, I initially thought something was wrong with my monitor. I don't understand why they added this feature.