YouTube is running an experiment asking some users to disable their ad blockers or pay for a premium subscription, or they will not be allowed to watch videos.
I just stood up a selfhosted Invidious instance the other day, and I replaced YouTube ReVanced with Clipious (an Invidious client for Android) on my phone. No ads, SponsorBlock built-in, no need for a YouTube/Google account to create subscriptions, playlists, etc. And it's highly performant since I run it behind a reverse proxy with some custom caching configuration for things like thumbnail images, static assets, etc.
Clipious can also be installed on an Android TV (has an actual Android TV interface). I'm going to end up installing it on mine, but I'm also using SmartTubeNext at the moment, which does require a YouTube/Google account for subscriptions, playlists, etc, but does have no ads, built-in SponsorBlock, and a slew of other great features. I'll be keeping both around, since I do sometimes like to cast to my TV, and SmartTubeNext allows for that (Clipious does not, at least at this time).
Unless YouTube somehow starts dynamically splicing in ads as part of the actual video stream, there's always going to be a way to block ads, unless they do something pretty elaborate. But that's probably not worth the effort on their end to go that far, since the vast, vast majority of people won't know what to do to get around that, nor will they probably care enough to try. But I think it's clear that DNS blocking using services such as AdGuard Home, PiHole, etc, are going to become less effective over time.
The main advantage to me is that I can work with Invidious as a backend, and whatever I configure there will reflect in Clipious as a client. So as I subscribe to new channels in Invidious, add or update playlists, etc, Clipious will reflect these changes accordingly. Advantages of selfhosting Invidious that indirectly benefit Clipious are of course built-in adblocking by virtue of how Invidious works, SponsorBlock support, and the ability to cache static assets, such as video thumbnails for faster load times, using a reverse proxy (Nginx is what I use). There's a lot more we could dive into beyond this, such as no Google account requirement (for enhanced privacy).
One area where the SmartTubeNext and YouTube ReVanced combo has the advantage is the convenience of being able to cast from your handheld device to your TV. Clipious/Invidious has no casting ability. But I can totally live without that.
I have all my Nginx files separated and using include statements for organization, so I can't quickly and easily post an example, but a good place to start looking is at the various proxy_cache directives.