How Bits convert to dollars
A Bit is worth exactly one US cent to the streamer who receives it, so the conversion on the creator side is simply Bits ÷ 100. The viewer side is less tidy: Twitch sells Bits in bundles whose price per Bit falls as the bundle grows, from $0.014 for 100 Bits to about $0.0123 for 25,000. The calculator shows the payout and estimates the viewer's cost using the per-Bit rate of the largest bundle that fits the number entered.
Where the difference goes
The gap between $1.40 paid and $1.00 received covers Twitch's share, payment processing and, on mobile, the app store's cut. That is why streamers often say Bits are a worse deal than direct donations for large amounts, while still preferring them for on-stream recognition and because Bits cannot be charged back the way a PayPal tip can.
Assumptions
Prices are US web checkout and have been stable for several years, but Twitch runs discounts, first-purchase bonuses and regional pricing, so a viewer's actual cost can be lower. Payout timing, the $50 minimum and tax withholding depend on your Affiliate or Partner agreement and your country. Cheering with Bits in a channel that is not Affiliate or Partner is not possible, so the payout side only applies to monetised channels.