What you’re describing sounds a lot like Second Life, which launched in 2003 and is still running. (Incidentally, to tie it back to Genshin, Second Life recently banned gacha-style transactions on its platform [0])
I'm familiar with SL. And yes it has some of the elements of this, what it doesn't have (or didn't when I last looked at it) were constrained physics story lines and a questing model tied to in game currency. Mostly it was around converting "real" money to "Linden" Dollars[1] to facilitate in-game transactions.
[1] And at the time (2008) there were sites that would convert your Linden dollars back into cash.
[0] https://ryanschultz.com/2021/08/02/second-life-bans-gacha-ma...