Its just a thought experiment. While yes the first reality to the first simulation may use a subset of information to create that simulation. We have no clue of how, when that simulation creates a simulation, then that one creates a simulation, and so on, would turn out. If each simulation is designed to evolve with the evolution of it's internal intelligence we can't predict how a simulation 20+ down the line may look. Of course they could all just be a continuous stream of "boiled down" realities. In that case eventually you reach a point where the prior simulation is so basic, it has no more basic subsets from which to build yet another simulation.
Its just a thought experiment. While yes the first reality to the first simulation may use a subset of information to create that simulation. We have no clue of how, when that simulation creates a simulation, then that one creates a simulation, and so on, would turn out. If each simulation is designed to evolve with the evolution of it's internal intelligence we can't predict how a simulation 20+ down the line may look. Of course they could all just be a continuous stream of "boiled down" realities. In that case eventually you reach a point where the prior simulation is so basic, it has no more basic subsets from which to build yet another simulation.
...Simulation