ED doesn't have instances in the way most other titles have instances i.e. there are no geographical areas that deal with players and npc entities when entered or exited by players, or that get replicated on servers when the player limit is reached. Rather every player has their own network bubble around them and when within the proximity of another player, those bubbles get merged together in an ad hoc manner and then seperated into two bubbles again when they move apart. As other players get within range, the merged bubbles increase in population to a "blob" if you like, until a limit is reached and the ad-hoc PtoP network becomes "unhealthy", after which new players will form new ad-hoc networks "blobs" invisible largely to the first (there is some interaction on the backend). The merged network (used to be called an island by Frontier - not sure if that's still the case) can be anywhere in the star system and there can be many in any one location, based on player population density. They are completely independant of location within a star system and also from objects, from stars, down to pebbles (and NPCs), which are "spawned" into the bubbles if that bubble happens to be in the vicinity. There are exceptions e.g. light source from the nearest star and gravity frame of reference for physics calculations from the nearest star, planet or moon.
As for physics objects - all objects in ED are "physics objects", as players are walking inside stations, which rotate about their own axis, which then orbit moons (using physics based calculations), which orbit planets, which orbit stars, which orbit each other in multi-star systems, all within one game space (system) which gets loaded for each of the 400 billion star systems . All in realtime (you can timelapse to show this if you have the patience) and all using standard physics based orbital mechanics, that match what we see in the cosmos in real life around us.
One of the few times physics is "broken" (although it still obeys maths based logical rules) is in supercruise, which is still within the coordinates of the star system, but is kept seperated, as the speeds at which players travel there are incompatible with those in "normal space" e.g. there is no point performing any calculations between players in supercruise and normal for say collsiion detection as by the time you check for it, the supercruise player is huge distances away from the "normal" space player. However, some checks are still carried out in case somebody has to drop to normal space from supercruise e.g. a fuel rat dropping from supercruise to a stricken player in normal using the wing beacon.
Star Citizen, from what I have seen, has a large 3D map centered around a light point source (star) hosted by a server and populated with static planets and moon objects around which players can move by themselves or drive essentially mini-maps (ships) around, until a limit of entities or players is reached, whereupon a new server is required.
The shortcomings of this approach is that player population forces CIG into provisioning more and more compute/server architecture for more copies of Stanton for each 50 player occurance. From what I can gather from "server meshing" is that CIG will need more and more compute to do the same thing by either subdividing the big map statically (rather than making more copies) and hope they have predicted where the player load will be, or if spun up dynamically hope they can manage the entity management challenges when that happens and it can be quick enough not to be noticed (not likely). You'll also still be limited to 50 players per server and you'll unlikely be able to see other players or entities being handled by other servers across the geographical/server boundaries (you may be able to do text/speech based comms in the same way hopefully a lot of folks use Discord outside of their chosen MP games).
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