In the last years of the twentieth century and the early years of the twenty first century, globalization with all its aspects and effects, has laid a ground which has originated and/or deepened structural weaknesses of states, their inability to answer the citizens’ demands and functional crisis of states. Formation of international institutions, international non-governmental organizations (NGO) and new social movements has led to the states’ inability to make ground decisions regardless of the outside ambience as past. Following this trend, states has inevitably revised their role, status and function so as to face the increasing demand of their citizens and maximum utilization of globalization opportunity. As a result of this revision and minimizing the states’ functions, states gradually has moved away from traditional sources of power such as land, armed forces and production dependent on land and turn to intangible sources of power like professional workforce, capital, information and technology and entrepreneurship. This so called metamorphosis results in the formation of virtual states in different corners of this world. Virtual states aim at pioneering the third wave of human’s civilization by recognizing new sources for power and wealth production and distance from worshiping a land’s talisman and providing a perspective of peace. This article investigates the major aspects of new virtual states and conditions and situations provided by globalization which has provided an apt ground to form virtual states.