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I thought iOS Safari had built-in ad-blocking functionality (block list filled by extensions)?

I can't block youtube ads on my iPad.

Sure you can, you can run something like Wipr [1] and SponsorBlock [2] in Safari on an iPad for an ad-free YouTube experience, in the browser.

Of course there is a compromise on the video quality (1080p max) and convenience of the official app.

I believe you can if you use safari instead of the YouTube app.