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Your (2) opens a networked game to malicious clients manipulating the AI inputs.

I'd suggest digging through old EVE:online devblogs and presentations. They describe server architecture and design points, as well as the process of tuning those with each other and actual community use.

https://community.eveonline.com/news/dev-blogs/ https://www.youtube.com/channel/UCwF3VyalTHzL0L-GDlwtbRw

Regarding (2), there are some MMORPGs that went with this approach, producing hilarious results, obviously - talk about cheat programs allowing players to teleport monsters around etc.

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