[glenra]

>Most systems of government can work at small scale.

That's part of the idea. Existing governments are too big and stodgy, too slow to change. This is like having a "startup sector" for the governing industry, a place where new ideas can be tried out. If it works, people who want to live under the new rules will have a place to go. If the new ideas work extremely well, the old land-based governments will eventually adopt some of them too.

> They really need to be sovereign, or they're just big cruise ships.

The first ones will likely be flagged vessels, as cruise ships are. (There's still a lot of room for jurisdictional arbitrage - you can pick the nation that gives you the most freedom with respect to whatever metrics you care about.)