As good as the demo looks, I refuse to believe it would be possible on any ordinary internet connection. It says it's tracking over 23,000 individual objects, which will all have their own equations applied and whatnot.
Let's just imagine for a moment trying to send down the gravity equations and other stuff for 10,000 objects... Yeah, looks almost impossible. Now double that and they're saying it's completely achieveable. ########. With a 10Gbps LAN it might well be.
All have their own equations applied? No... it's the same physics, the same equations, applied to every object...
Sending down gravity equations? The equations don't take up any space at all. It's the time to apply those calculations 20,000 times.
Math for 10,000 objects, assuming no compression:
Transmitting the positions of all the objects to the server? 117 kb of information (10000 * 3 floats * 4 bytes/float).
Transmitting the orientations of all the objects? 156 kb of information (quaternion... 10000 * 4 floats * 4 bytes/float).
Transmitting the velocity of all the objects? 117 kb of information.
... several more fields ...
Your estimated bandwidth? 10 Gbps? 1.25 GB/s? It would take 1/3 of a millisecond to transmit the data (excluding latency) at that speed.
At 60 fps, that's 16.6 ms per frame. You could transmit the data back and forth 50 times each frame (ignoring latency). At the 30 fps demoed, you could transmit the data back and forth 100 times in the time between frames.
You don't actually have to pre-calculate everything for the path. All you have to do is offload crude bounding box calculations... determine which objects will be colliding in the cloud. That leaves your gaming console to calculate the actual collisions, without having to go through the huge problem of computing which of 30,000 objects are interacting. Most of them aren't.