Bring back tag presets in combination to the new tag system
With the new tag system, streamers can have up to 10 tags and can write custom tags, while the old system only allowed for 5 tags picked from a list. This a huge improvement, however this change also brought a lot of downgrades that overall makes the system less useful for streamers and viewers.
With the old system, a new streamer or viewer can type keywords and Twitch shows suggestions from the list of preset tags. For streamers, this helps them discover what they could do to make their stream stand out and know what viewers may search for. For viewers, this guarantees they find the niche they are looking for if it exists. It's all about making sure streamers and viewers can find each other based on common interest.
With the new system, the preset tags are non-existent apart from the tags predefined for the category. This creates a guessing game between streamers and viewers as to which exact tag should be used so they can find each other. Streamers are made less discoverable and viewers have a harder time finding content they will enjoy.
A good middle ground would be allowing custom tags but keeping the tag presets for common interests so Twitch can suggest tags when one is typed so viewers and streamers can be assured they will find each other.
Another issue with the new tag system is the lack of spaces and special characters. Although this allows for nicer looking URLs, it makes certain tags such as LGBTQIA+ harder to read and also causes issues with the automated content filters as demonstrated here https://www.reddit.com/r/Twitch/comments/wmq9v3/whats_up_with_the_new_tag_system/
An alternative would be to use URL escaped strings to store the tags or alternatively use a combination of underscore to represent spaces and escape characters for other special characters.
With this combination system in place, streamers and viewers looking for common niches are guaranteed to find each other, whislt keeping the flexibility of custom tags for nicher content.

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SinElPaco commented
I totally agree with this, I can't find any streamers to connect with because when I search for custom tags no one shows up, it was easier when there were the predetermined tags that I could just put Spanish and find anyone that speaks my language, but now I can't have easy access to Spanish content since I will have to type the exact "Spanish" or "Español" tag which makes it harder because not everyone use those tags, I say having customs as well as predetermined tags should be the way to go.
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Sigmund_Froid commented
The new system suffers from inconsistency, as, naturally, different people use different words.
This, in turn, makes it difficult for users to actually use the Tags, since there are different versions of the same community.
Users won't be able to find the community they want to join as easily, diminishing the point of having Tags in the first placeA combination system would definitely solve this issue, and would offer more to the previous system, while losing nothing from it.
As is, the new system creates more issues than it solves, as it doesn't properly serve the purpose tags were supposed to serve in the first place -
TheBoxyBear commented
According the the Q&A on the new help page regarding tags https://help.twitch.tv/s/article/guide-to-tags The decision to remove custom tags seems to have a lot to do with the lengthy approval and localization process.
Having both custom and localized tags would be very complicated if not impossible though I don't believe localized tags are a necessity. By localized tag, I am specifically talking about a single tag showing the same stream while also going under different names based on the locale of the user. Localized tags under the proposed system would take all the old tags and their localizations and separate them as stand-alone, language specific tags. For example: 'Hard Mode' and 'Mode Difficile' would be different tags. The logic being that streams have a primary language and tend to use custom tags that match that language. A viewer that would search for a tag using its name in a certain language is very likely to also be searching for streams in that same language.
Regarding the submission process, the mere addition of custom tags should lead to fewer submissions as there is now an alternative. As for the submissions that are sent, they could be approved as single-language tags without being localized, further cutting down the length of the process. A downside to this would be that approving tags in a single language will cause duplicate submissions that need to be analysed and approved once again. In order to prevent these duplicates, the submission process could be made so that a user can request a localization to an existing tag. Since the tag has already been approved, all that needs to be done is either coming up with a localization or making sure the one submitted matches the meaning of the original tag.
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clockworkROCKWORK commented
I agree with this: the custom tags should be integrated with the old tags. About a year ago, Twitch unveiled nearly 100 new tags for creators to be able to label their content in accordance with their individual identity and the subject and focus of their streams. The new system seems to allow more individuality and customization, but having no standard creates a 'wild west' of tagging and this will undoubtedly leave many users behind, or copying other users tags, which does not really promote individuality.