The problem with your scheme is that to update frame X correctly, I have to have all input for frame X, which is now 200ms ago. Meanwhile, I need to be presenting something to the user now. Prediction is basically a way to deal with the fact that you can't do what you're describing.

Also, don't underestimate your users. Encryption is irrelevant, they'll hack into your program's process space and read the stuff after you decrypt it, and obfuscation is at best problematic for the same reason. For a AAA-class game, assume all users have access to all data on the client at all times and you'll not be far wrong. Sort of how like in the encryption world we just assume that the attacker knows the algorithm already.