From 1932 to 2000, reading was taught through the use of sight-words. Not the alphabet or the sounds. Children memorized every word as a sight-word. So we have massive functional illiteracy.... and dyslexia.
Sight reading may have dominated during that period, but phonics was alive and well during my childhood. My parents, probably without even realizing it, helped me learn to read at the ripe old age of three by sounding out the letters of words.
By the way, there's nothing unusual about three-year-old children learning to read. Children who are read to tend to learn to read without instruction or apparent effort: simple, innate curiosity leads them along.
Learning to read by phonics was the standard method at the grade schools I attended. My mother, who later went back to school to become a teacher, taugt sight reading some while as a volunteer, only to realize phonics got the job done both quicker and with less effort.
I have to wonder what kids do in South Korea, Japan, China, and other countries with ideographic rather than phonetic alphabets. I have a hunch it could be worthwhile for someone who knows to draw some comparisons.
I read to my children from the time I could put them on my lap and open up a picture book. We had a very small, Muppet Babies Alphabet Book which I used to start both of my daughters off in learning to read. We read constantly, and, by the time my eldest was two, she would point to words she knew and say them, and she would ask what words were when she saw one she didn't recognize. My youngest was different, and was not quite as far along as my eldest; but, she was reading single words by the time she hit 1st grade.
Learning to read by phonics was the standard method at the grade schools I attended. My mother, who later went back to school to become a teacher, taugt sight reading some while as a volunteer, only to realize phonics got the job done both quicker and with less effort.
The 1st grade teacher at the Catholic school both my girls attended used phonics and would send home little phonics games (home made) for us to work with our children at home. One time, while talking with a couple of the 2nd and 3rd grade teachers, they both said it was so easy for them, because they knew the kids coming out of her class (1st grade teacher) would be ready for the work in 2nd/3rd grade. (This school combined grades after the 1st grade. So, there were 2/3rd, 3rd/4th, etc.)
I learned to read at four via sight reading and am a published author, so perhaps you want to reconsider your claim that sight reading breeds illiteracy.