Earlier quoted context omitted.
What makes the simulation we live in special compared to the simulation of a burning candle that you or I might be running? That simulated candle is perfectly melting wax in its own simulation. Duh, it won't melt any in ours, because our arbitrary notions of "real" wax are disconnected between the two simulatons.
They do have a valid subtle point though. If we don't think the candle in a simulated universe is a "real candle", why do we consider the intelligence in a simulated universe possibly "real intelligence"? Being a functionalist ( https://en.wikipedia.org/wiki/Functionalism_(philosophy_of_m... ) myself, I don't know the answer on the top of my head.
I can smell a "real" candle, a "real" candle can burn my hand. The term real here is just picking out a conceptual schema where its objects can feature as relata of the same laws, like a causal compatibility class defined by a shared causal scope. But this isn't unique to the question of real vs simulated. There are causal scopes all over the place. Subatomic particles are a scope. I, as a particular collection of atoms, am not causally compatible with individual electrons and neutrons. Different conceptual levels have their own causal scopes and their own laws (derivative of more fundamental laws) that determine how these aggregates behave. Real (as distinct from simulated) just identifies causal scopes that are derivative of our privileged scope.
Consciousness is not like the candle because everyone's consciousness is its own unique causal scope. There are psychological laws that determine how we process and respond to information. But each of our minds are causally isolated from one another. We can only know of each other's consciousness by judging behavior. There's nothing privileged about a biological substrate when it comes to determining "real" consciousness.