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Sometime it's better to let it happen and let the user find out the person who mis-transcode video maliciously and get that malicious person banned from the instance. Many instances are invite-only, so it works out in a way that the benefit outweigh the risk.
The average YouTube user is not going to understand any of that. If they're watching a video and something unexpected comes up in the video, they're going to blame the person who uploaded the video.
I suppose although the documentation does point it out that the offender can modify such content with ease.
For live transcoding, I would suggest the broadcaster to purchase a good GPU and have it transcode the broadcast. While they are trying to suggest CPU-based solution, i would argue that they should explore the GPU based solution which can be much better optimized for this scenario.
Reference on Support Matrix for Encoding/Decoding support on GPU for Nvidia Information for Transcoding on Nvidia GPU