It's never critical to stop hackers in a videogame IMO. We need to stop being so damn serious about gaming.
Is it fun to be a non-cheater, and join a multi-player game where there are other players using software cheats that let them easily beat you every single time?
I'm pretty sure I would quickly stop playing that game, and demand the publisher refund my money. That's just not fun.
And that's just as a casual gamer. For people who compete and win prizes, endorsements, etc., the stakes are a bit higher.
I'm not saying kernel-level rootkits installed on everyone's machine is the answer, but letting people cheat isn't going to work either.
(I’d still lean towards expecting game houses to find another way, kernel drivers are still client side trust mechanisms).
One user is on a connection with 10ms latency, the other user is on 50 ms latency. Now, if first user does something, and second user can either do something to evade or can do something that actually prevents the first user from acting, how do you consolidate that?
The actual timestamp of when exactly what happened helps immensely, but you have to trust the timestamp. And how can you know that is not manipulated?
But... that's just the surface. Consider: one client uses a rendering that takes 25ms longer to show up and another client does not render textures/shadows etc. That client is faster and the sender can even send "official" response times, but would still give an advantage.
So, I am not sure this can be solved serverside. But... I don't play these games anymore and would never opt for a rootkit to be installed just so I can play. I can imagine plenty of people, though, who would.
Well, this problem simply can't be solved server-side only. Client-side can't be validated without rootkit (and even then it's not enough, but enough to deter majority of cheaters).