So what I am searching for is a module that gives us the exactly same functionality that we already have with the image tool in Drupal 8 in the WYSIWYG editor.
And that should be working with just uploaded videos.
I found that this module should be doing it for D7 - https://www.drupal.org/project/video
For simple solution Just get video_embed_field which includes module Video Embed WYSIWYG Enable both of them. You will get options to configure your WYSIWYG here admin/config/content/formats/manage/full_html. Just add the Video button in toolbar and checked the option Video Embed WYSIWYG. I hope you get what you want.