I need to amplify something in my previous comments about geometric decomposition. I said "there is a practical minimum size limit to even the dynamic splitting of a region. What does that mean?
Decomposition doesn't affect the distance that a character can see, or the number of other Entities that it can see or interact with. That is controlled by tuning and the game design. If someone wants every Entity in the game to be within 5 m of each other, then every Entity will see every other one.
However, that doesn't have anything to do with *load leveling*. Load leveling is the decision about where to execute the behavior for an Entity. There is no reason that the same host must execute all the Entities in one geometric area. There are many fairly easy ways to do that computation and get the same answer whether the two Entities are owned/executed on the same or different hosts.
In our flash-crowd example, we have actually made things worse by decomposing into smaller pieces of space, and mapping each to a different host. Now when an Entity moves just a little way, it may have to migrate to a new host because it cross a boundary. So our Entity migration rate goes through the roof, costing computation and communication overhead. I can show that it is unnecessary overhead, and unfortunately is applied at the point in the virtual world that is the most busy.
Someone may argue that Entities that are near one another *must* be on the same host to interact. That assumes they are directly reading *and* writing one another's state variables. The problem is that this approach precludes the direct interaction of any two Entities that are across a border (and maybe that border is shifting around if you do this dynamically). A designer, and a player wouldn't understand why there were some places they couldn't do some things. Poor ease of use, mental models of computation that are too complicated.
It turns out that there are pretty simple approaches that allow Entities to interact transparently across hosts. That fact makes all the difference.