it does. But if you could drop an encrypted VM on each client - where the instructions and responses were encrypted, and even frozen/dumped states were encrypt

it does. But if you could drop an encrypted VM on each client - where the instructions and responses were encrypted, and even frozen/dumped states were encrypted... you'd finally have no need for centralized game servers to arbitrate who sees which part of a hidden state. You could put every player's secrets, and the secrets of the game state, on each client and use their processing in parallel.