I’d seperate the issues here, really.
Whether you have a single server that has the “correct” world state or you use a scheme where responsability for the world state is split among the users (typically each suer is repsonsibel for themselves and their “shots”, the issue is fundementally the same-- one of prediction and correction of the non-local information to cover latencies.
This is assuming ofcourse this is an action game and not a turn-absed where you can afford to just sit and wait for updates for however long it takes, but if we were discussing the latter then it would be a non-issue and there would be no need for discussion 8)
A seperate issue is how you architect the understanding of what is “correct” in the world. As I mentioned, one solution is to have a server-side model that is the canonical oen and give everyone imperfect represontations of that. This is the only truely secure model for such an action game if you are worried at all about cheating as anything on the player’s machine cna be potentially manipulated by the player.
HOWEVER a simplsitic model like that leads to the LPB (“Low Ping Bastard”) phenomenon, as we saw in Quake 2, for any game that requries reaction timing. The lower someones latency to the server the mreo control they have and thus they have an unfair advantage. For this reason in action games we usually see a mixed server/client strategy that does not peanlize the high ping players so much but also doss leave some potential cheat holes up. The game developer in this case instead of focusing on cheat avoidance generally tries to create cheat-detection, with varying degrees of success.
Most MMOs get around this by removing the twitch element entirely. If you really loo kat their combat systems, even the most phremetic ones such as City of Heroes are really using a tactical system where the user is only sending one command every few seconds at most and there are generally reasonable “default” actions if the action has not gotten tp the server by the time the combat round needs to be calculated.
I hope that ramble helps some. As I say, ist best to clearly sperate the issues in your head. They come down to (1) latency hiding (2) world model and (3) combat system. The issues ofcourse are fairness (which includes security) , verismilitude, and fun.