Contemporary distributed virtual environments are growing out of terabytes of 3D content and hundreds of thousands of users. Server-client architectures have become inadequate for fulfilling the scalability requirements. The peer-to-peer architectures provide inherently scalable, cost-effective distributed solutions for distributed virtual environments. We present a fully distributed peer-to-peer framework, Phaneros, which is capable of providing necessary means to realize more efficient and more scalable massive distributed virtual environments. Using the presented visibility-aware interest management, Phaneros performs better than existing overlays, achieving single-hop update dissemination while having lower bandwidth requirements. The provided visibility-aware 3D streaming scheme distributes 3D content more efficiently without creating any significant load on the server. Our test results show significant improvements over existing frameworks.