First, here are the reasons I'm not convinced that functional states actually exist on civcraft.

There are four characteristics of a "failed state":

1. Loss of control of its territory, or of the monopoly on the legitimate use of physical force therein
2. Erosion of legitimate authority to make collective decisions
3. Inability to provide public services
4. Inability to interact with other states as a full member of the international community

legitimate authority to make collective decisions

interact with other states as a full member of the international community

Many civcraft states do well on these things. Most states have diplomatic interaction of some kind with other states. Also I'd guess about half of the cities out there have leaders of some kind who are internally viewed as legitimate, and who are also able to make decisions and to negotiate with others on behalf of their city.

monopoly on the legitimate use of physical force

This is where all civcraft states fall flat. If the world police, the LADS, the "mall cops", the BK, the HCF, or any other gang of coolpvpers has the ability to exert power in a state's borders, at will, without that state's consent but without effective opposition, then the state is failed in this respect. For example, Orion was the highest population city on the server a year ago, yet its government was powerless to prevent the LADS from its scheduled and preannounced razing of the Orion Gurubashi building.

So were the LADS a state? (not that they were trying to be). Well they may have had a server-wide force monopoly, but they did not have legitimacy since nobody consented to their rule. Also they had no leader who could make decisions for the collective or negotiate on behalf of the collective, so there was no way for them to conduct true diplomacy with other states.

provide public services

The most important state services which apply to civcraft are things like internal security and a justice system. Without a force monopoly justice can't be provided consistently (the powerful are immune to the justice system), so most states are handicapped here in spite of sometimes putting effort into writing laws and establishing courts.

States and anarchy in civcraft and RL

In the real world, countries help each other to avoid anarchy. If a state starts to fail, other stable or powerful countries will try to help it out because they don't usually want anarchy and chaos surging across borders and taking out other stable states. This might mean installing or removing leaders, giving aid to prop up basic services for the people, or giving security assistance to a legitimate government. If all these things fail the country might find itself isolated, with stable neighboring states sealing their borders so the mess is at least contained.

In civcraft all of this is completely opposite. The server is mainly in anarchy, and statehood is a rare thing that happens in small pockets if at all. State power is viewed by many as a bad thing that should be avoided or fought, while anarchism is often held up as an ideal. If a truly successful state began to form and actually monopolise physical force in an area of the map, it wouldn't be too surprising if some ideologically anarchist coolpvpers made a deliberate effort to destroy that state before it gained strength: anarchists helping anarchists to suppress or prevent government, as opposed to governments trying to help each other prevent anarchy.

"UN" is overkill (all we need is an "N")

So people are talking about creating a UN. But if you look at the features of this "UN" it seems they are just describing the attributes of a state. A security structure that derives its legitimacy from open systems and the consent of the governed, that has clear leadership and command structure and internal rules, which exists for the purpose of providing justice, and which all the white knight coolpvpers will hopefully join. The only difference between a true functional state and this UN idea is that this UN is suggested to be global, and coexist with or absorb city governments.

I posit that this last condition is unneeded. It would be an easier task if players just banded together and formed a territorial state. It's fine to talk about making an international government, but right now the server doesn't even have true national governments to build such a thing out of. Also if with all the different governments on the server, not one of them has ever even monopolised force in their own city, why does anyone think it will be easy to make this happen for the entire world? Especially with all the anarchists out there who will actively or passively oppose the effort.

My Alternative Blueprint for Action:

Figure out which existing civcraft state has the best potential to monopolise local use of force into the hands of a legitimate government. Governments are a dime a dozen, militaries not so much; so the best approach might be to rank states' militaries and look for one near the top that also has representative features in its government, and in which the military is solidly under the control of that government. Now move there and bring all your wealth. Get all your friends to move there too and bring all their wealth. Use your new influence in that government (you brought all your friends with you, and it's a somewhat open system right?) to work on enhancing the key points of successful statehood: legitimacy of government (based on open mechanisms and consent of the governed), justice and the rule of law, centralised leadership, and monopoly of force in the hands of the state organs.

If a project like this manages to create a line on the map that HCFs and LADS and other anarchist groups can't violate, while internally it has an inclusive government and a fair and functioning justice system, it's already the greatest state in 2.0 history. Population will be attracted because of the better conditions. Neighbor states will ask to be included in its security umbrella. In time it will become a de facto world court and international arbitrator just by making a reputation for upholding justice. Basically everything people want in a UN, except it won't need or want to have global sovereignty. This massive map has plenty of room for states and anarchists to coexist.