How does tie in with the real world?

What aspects "political entities" of the real world can't be covered online alone

Solution: strong local communities + managed wide area community collaborations

Ultimately any citizen of any nation of has at least one place of residence. Therefor an online citizenship alone can never be enough. as plattform for political systems can only work with strong, local area communities providing specific services to the population of the area.
Therefore we assume that any citizen has at least two "service providers": his online nation and his local community.

Most services (energy, waste management, ...) can surely be handled simply by sourcing from service providers in a free market. Others like energy, main roads, environmental resource management requires the teaming up of local communities and joint sourcing.
The formation of "interest groups" based on geographic co-location therefor makes sense online as well to decide area based issues together (like traffic / transportation infrastructure, resource management, ...).

Region based online "nations" like "North America", "Central Europe", "Asia", "Africa", ... definitely would make sense for certain aspects of joint decision taking by the inhabitants of the regions.