Distributed physics is a well understood problem with no "solution". Just different trade-offs. This solution is cool, but it's not novel or anything. Minecraft is particularly challenging because the entire world is highly mutable.
There are no general solutions to any of this. Just a bunch of custom one-offs. SpatialOS is trying. My opinion on it is extremely, extremely negative. And I'll leave it at that.
Unity and Unreal both have primarily single-threaded gameplay. Writing multi-threaded gameplay code is extraordinarily difficult. Unity has been working on their DOTS/ECS system for years, but it does not appear to be close to ready for the mainstream.
So I think the short answer is "it's really really hard. Like, radically harder than you are imagining. Even if you think it's hard. The value of that work is likely not worth the cost. If most players WANT to play on small servers with close friends then the mountain range of work to effectively support a 1000 player server is not worth it".