(apologies for the length of this comment, OP's topic got me interested in writing down some thoughts and doing that helps me figure things out in my own head)
Eastern traditions, particularly Buddhist traditions, have long contended that we are living in world of illusion
That's true, but keep in mind that to call it a video game is a trap if you take that too literally.
You can't talk about these meta level phenomena through our eyes. So long as you do that you'll always get it wrong. The universe can be thought of as a cosmic computer, but it isn't a computer it can only be said to be "like" a computer. The universe can be thought of as a machine, but it isn't a machine, it can only be said to be "like" a machine. The ways in which it isn't are crucial and you don't allow yourself to consider what that is once you've gone too far and decided you know what it is.
As you mentioned Buddism, there's a Buddist saying 'that if you meet God on the road, kill him'.
On the surface to many this will sound like a violent and blasphemous thing to say. But it's really a metaphor to convey the idea that you don't allow yourself to be blinded to the very human of mistakes of being too certain of your ideas. If you meet God on the road, it's an illusion, kill him. If you think you've understood the truth so specifically and literally, you haven't, it's an illusion. "Kill" that idea and keep looking. All your concepts must be put in their proper place. God is not a concept, so any conception will always be wrong. Reality is not a concept, so any concept you have about it will always be inadequate. Concepts will always leave out more information than they contain.
If you understand that and get used to this way of thinking you're allowing yourself to be open to new possibilities, new perspectives, new ways of looking at things.
Anything that's rigid and stuck in a ways of thinking always become weaker and weaker as the world changes around them. It doesn't matter how big they are, how successful they once were,
how right they've been at some point, how strong they appear to be, how vast their empire, or how long they've been around. They always end because they're fighting against the current, and that's always going to get harder requiring more and more energy. When things like this fail they tend to fail quickly, like the stress from weight of heavy snow pushing down on the branch of a tree, or a structural beam reaching a critical point of failure and buckling in a fire. Whenever inflexible thinking tries to fight against change it only speeds up it's demise (something quite relevant to cryptocurrency!).
People think the important thing they can rely on is everything they "know" and that's why you find so many stubborn inflexible people. They'are so desperate to find out what's true that they're quick to decide they've found it, whereupon they're now not going to want to think they were wrong or they feel they've gone backwards. The idea that they could be wrong implies something far more than just being wrong about that one thing, it implies that they're wrong about everything filling them with dread. One of the reasons we have the saying that "knowledge is power" is that even if you're in an unpleasant situation you can gain a sense of power the more knowledge you have about it. That's why people who finially get diagnosed with a terminal disease after many years of uncertainty tend to describe it as a relief because it was the uncertainty that was the most upsetting. The reality is you can't ever rely on knowledge where you can say something is set in stone. As I said earlier, you can only have a concept of how something is and a concept of reality isn't reality. The desire to need to believe we know something that is definitely true, something solid and substantial and "set in stone" contains reflected in our speech the ironic mistake in thinking that stone is permanent and strong.
We tend to think of rocks as representing strength, but it's our fragility and the size of rocks that cover up it's real weakness. Water can carve it's way through rock like a knife through butter given time. It can effortlessly seep into every into every crack, every hole, every crevice and with nothing more than freezing temperatures then fracture the most seemingly mighty and permanent of structures and eventually mould the crumbled sharp and jagged pieces into perfectly smooth pebbles. Whether it's biology or geology, or science or economics, this always applies. There's a reason everything appears to change but the sea can remain so timeless. So people aught not to use the rock to represent strength and permanence, rocks really more represent the opposite of permanence teaching us not only can rocks not escape change but the very qualities we associate with permanence exhibited by rocks are also it's greatest weakness. Better instead to aim to be more like water that can appear deceptively weak yet it's powerful enough to shake mountains apart and carve it's way through them without needing permission.
You build up a solid framework of reality that's far less at risk of being pulled out from under you when you value exploring your multi-dimensional ignorance rather than trying to congratulate yourself on how much you think you know. Where you enjoy discovering some irrational perspective or belief you had because you know the more you can discard them the more you're only left with what's real. Existence is enough of an illusion without creating and nurturing your own! When life throws your a curve ball and shatters your sense of reality of how you thought things were, you'll not be thrown into such complete chaos and uncertainty not knowing how to trust your judgement of even the little things. Those who think the solution to chaotic uncertainty is to value what they "know" leads them to convince themselves they understand things they don't and ignore their mistakes. They really suffer when that house of cards collapses, and if they've been building it for some time that can be a long way down to fall and some might not recover when they hit the ground. But you need to return to the ground to understand how to trust you judgement, where you have another chance to understand whats real and not build illusions on top of illusions. Sooner or later a false image of things always collapses.
There's truth in all perspectives, but where it all goes wrong is thinking it all has to be correct or none of it is. Seemingly contradictory perspectives can be reconciled if you approach them with the understanding that they're both true when you get right down to the core of it.
A long held idea is that for all the stories we've ever told they're all just the telling of the same basic archetypal plots over and over in different ways. The names, the settings, the environment, the personalities and technology may change, but at their core they're the same. At another level we can see that there is really only one story we keep telling over and over. We're telling the same story again and again we're so fascinated by it and variations of it because we're trying to understand the same question, the one question we've been trying to understand ever since we first gained self awareness. Notice how the single basic plot heavily resembles "Samsara", the Buddist concept of the "cycle of suffering", the wheel of repeated birth/death/and rebirth. We're interested in these stories because they're our story. Everything in these ancient mythologies and religions should be thought of as metaphors that are fundamentally trying to describe something true.
Approaching our ideas as analogy and metaphor is very important to understanding in general, because an analogy is what something is "like", not what it "is".
Physicists especially should understand this, as they will often attempt to describe concepts in physics by way of analogy to something else. When physicists talk about Quantum Mechanics that's pretty much *all they can do, but you have to realise that it's just an analogy or you'll definitely not understand.
Our perspective as a human being should make us forever humble in our ignorance. Our perspective is a very small fraction of reality and you can only gain any real or useful understanding of the world unless you have some conception of that.
Think of "The Matrix" as great myth, a story, an analogy. But just don't take it too literally, don't take it too far.
Instead think of these stories or ideas as "representing" reality just like analogy, not as a literal description of reality itself. What you're seeing is a representation of how we feel. Fire, ice hope, fear, love, terror, emptiness etc. Representing our desires and fears, of our sense of self and other, the desire to connect and disconnect from each other, to want to come together and yet stay apart. We connect to stories and really to people in general because we see in them part of ourselves in some way and the more whatever it is connects with something we recognise the more fascinated we are by it.
We need to be free to think in terms of analogy because we can only think of and describe things that we are already familiar with. We shouldn't restrict ourselves by thinking we need to be literally correct, because it's not possible for us to do that. We need to describe things we don't understand by way of analogy and metaphor because we need to be able to identify pattens we understand first. Analogy and metaphor are ways that let us think about and communicate what patterns we think we can see. Wisdom is to understand that the pattern you identified can help you understand what it really is, but only if you understand that it's not the same as that pattern you identified just because it's similar. Many phenomenon can be seen to have a pattern of behaviour like that of something else, but it's the ways in which it is NOT the same which make all the difference. A wild wolf might behave "like" a domesticated dog in many ways, but it's the ways in which it doesn't that could be the difference between life and death. This is what I mean when I say identify what you don't know. Unless you first identify your ignorance you can't begin to gain any knowledge.
The ways in which reality is LIKE a "simulated reality" is important to understand, but that the ways in which it ISN'T anything like your conception of what that means is of fundamental cosmic importance. That blank space, everything you're ignorant of, that's where the real truth is right there and you don't know what it is.
Humbly keep this in the back of your mind and notice if you're giving too much weight to your own concepts. Life is more hopeful and exciting that way anyway, because when you know how little you can rely on your own limited perspective you're free from seeing life as glass half empty when you know there's no reason it can't be glass half full. You never want to get caught in the trap of thinking you've got something "right" the same way a broken clock is "right" twice a day.
@zer0hedge
One last thought....
It's like the ancient Buddist parable of the blind men and the elephant. Many variations of the story exist but effectively it goes like this. Each blind man touches a different part of the elephant and describes it, then argue about what the nature of what they are examining. One of the men holding the trunk argues it's some kind of thick snake. Another man touching the ear doesn't know what the other is talking about and thinks it's a fan. Another holding the elephants leg things it's most like a tree. Another blind man holding the tail thinks the one calling it a thick snake has definitely got it wrong because it's obviously a rope. Another holding the tusk says it's smooth hard with a pointed end and argues it's more like some kind of spear.
The moral of this story is the same as I've talked about above. EACH WAS RIGHT, AND EACH WAS WRONG AT THE SAME TIME. The elephant represents the universe, the blindness represents our limited perspective. As I said earlier everyone's perspective contains something fundamentally true at it's core. If you work on seeing that in others and yourself you're finding pieces of the puzzle. You can then start to put them together, but as much as you can start to gain a sort of genuine understanding like you'll have never experienced before, it will also reveal how much more you still don't know and which you sense stretches out more and more further and further before you. That's why there's so many wise old quotes on how the more knowledge we gain the more we realise how ignorant we are.
We'll never be able to look at the universe all at once and see what it "really" looks like because at a certain point it all becomes relative and you can only derive meaning from context. White noise contains all sound frequencies, white light contains all colours, all sound waves are made up of sine waves. It's only meaningful and not a mess to us once we're restricted/blinded from being able to perceive most of it.
We'll never figure out a true "theory of everything", because there'll always be something that doesn't fit our concept of the universe. Something pesky either big or small that either has no explanation for it's existence or shouldn't exist and yet does. Even if it's something small, that will inevitably become something far bigger once we try and study it and we find 1000 other inconveniences. Observing the behaviour of sub atomic particles was incredibly inconvenient. Our theories didn't predict we would find the universe behaves this way. Finding out that it did meant we'd come all this way only to find that when we got down to the basic stuff the universe was made up of none of the logical rules we'd so carefully thought we'd figured out quite nicely over thousands of years could be relied on.
All of a sudden we had to think the unthinkable and try and find new logical patterns in this chaos all while trying to make sense of the fact that such a different reality somehow is at the basis of our own. Quite embarrassingly inconvenient as it highlights how much science doesn't know anything near as fundamental as our arrogantly overstated belief on our own knowledge shows when we talk of things like "laws of physics", as if we knew anything near that substantial. We're clearly just reacting to everything and just expanding the edges of our map when something unexpected comes along while acting like we know so much that we're mainly just filling in the gaps. The best we can do is to identify a pattern in the Universes goings on and be accurate enough with our predictions that on the scale and application we're applying them to that the ways in which we're wrong doesn't lead anything to blow up or collapse or sink or something. Einstein discovered Newtons theory of Gravity worked just fine if restricted to certain conditions.