Reading an extension's permission prompt properly
The install prompt is the only negotiation most people ever have with an extension, and it is written for lawyers rather than readers. The permissions are not decorative: each one maps to a capability, and the list tells you what the extension could do if it wanted to.
Read and change all your data on all websites
This is the broad one. It means the extension can inject scripts into any page you open, read what is on it, and alter it. Content blockers need it because they must see every request and every page. So do tools that harvest data, which is why the permission alone does not tell you whether an extension is trustworthy, only how much damage a bad one could do.
Read your browsing history
This exposes the list of pages you have visited. Very few tools need it. A new-tab replacement might, a screenshot tool almost never does. When you see it on something that has no reason to know where you have been, that is the moment to close the tab.
The narrower permissions are better
activeTab grants access to the current page only after you click the extension. storage keeps settings locally. contextMenus adds a right-click entry. A tool built on activeTab and storage is asking for far less than one demanding access to every site by default, and that difference is a reasonable proxy for how carefully it was designed.
Permissions can change after install
An update that adds a permission disables the extension until you approve it, which is the system working as intended. Read that prompt rather than clicking through it, because it is the only moment you will be told that a tool you already trust wants more.
Two questions that decide it
Does this tool need the access to do the one thing it claims to do? And does the access stay on my machine? A blocker that filters requests locally passes both. A tool that uploads page content to a server fails the second even when the first is satisfied.