Currently, the only option for transcoding regardless of a streamer's own setup, is to pray you're lucky.

This harms a ton of smaller streamers, viewers, and Twitch Profits alike. It forces streamers to prioritise lower quality, which wards off viewers in more economically sound positions in order to get the viewers required to get noticed by the clearly viewer driven promotion algorithm. This is highly self-contradicting, leading to the only chance for twitch to maximise profit being streamers downprioritising the users that would be the most likely to contribute large amounts.

Opensourcing already existing transcoding service together with something like OBS Studio would be a no-brainer in that regard, and also save the potential processing cost of transcoding serverside. It would increase network load, but that could be easily mitigated, especially if it gives more users incentive to contribute to streams.