A Russian billionaire has held a lavish ceremony at a castle in Austria to declare himself the leader of a new, independent "space nation" called Asgardia.

The self-funded event was held at the opulent Hofburg palace in Vienna and included a choral performance of the nation's anthem, an official oath, and a video message from Russian cosmonaut Oleg Artemiev on the International Space Station.

So what is Asgardia, who is the man behind it, and why are thousands of people signing up to be part of it? Here's what you need to know.

What is Asgardia?

Asgardia is the brainchild of Russian rocket scientist Igor Ashurbeyli.

He wants it to be the first fully independent "nation" in space, with its own government, virtual currency, justice system and calendar.

In 2016, Dr Ashurbeyli and a team of scientists, engineers and law experts unveiled plans to establish an Asgardian colony on the Moon, and to build a series of special space platforms, called Space Arks, where people can live.

Artists' impressions of the Space Arks show giant, clear-domed platforms floating through space with people walking through Earth-like neighbourhoods inside.

An artist's impression shows an elderly couple walking through a neighbourhood in artificial gravity. ( Supplied )

While functioning as a real nation, Asgardia would also help protect the Earth and keep the peace in space, according to the project's official website.

"Is it pioneering, futuristic and visionary — or madness? Call it what you will, and time will tell," Dr Ashurbeyli says.

Who will live on Asgardia?

At the moment, anyone can become a citizen of Asgardia.

But Dr Ashurbeyli has said he wants to attract the world's most creative minds, and may eventually bring in a mandatory IQ test for potential Asgardians.

More than 200,000 people have already signed up via the nation's website, including thousands of Australians, but Dr Ashurbeyli wants to recruit a total population of about 150 million within the next 10 years.

How close is it to becoming a reality?

It has a long way to go and many hurdles ahead of it, but Dr Ashurbeyli has made some impressive progress since its inception.

He launched the nation's first satellite, called Asgardia-1, last year and plans to expand that to a "constellation" of satellites by 2019.

He's also established a parliament made up of dozens of MPs, who met for the first time ahead of the inauguration ceremony in Vienna.

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Is Dr Ashurbeyli paying for everything?

You better believe it.

The Asgardian website says: "Let's be very clear: every penny, every cent spent on Asgardia up to date and still for quite some months to come is the investment by Dr Ashurbeyli."

"Not a single person, not a single company, not a single entity has spent a penny on funding Asgardia. This is all funded from the resources of Dr Ashurbeyli," it adds.

So what was this ceremony all about?

Dr Ashurbeyli wants Asgardia to become an official member of the United Nations, but to do so, it needs to be a functioning state or government.

Dr Ashurbeyli took the first steps towards it becoming one by holding parliamentary elections in December last year, and then later declaring himself Head of Nation.

Igor Ashurbeyli says he will serve five years as Asgardia's Head of Nation ( Reuters: Lisi Niesner )

The ceremony in Vienna, which was attended by hundreds of diplomats, scientists, engineers and law experts from around the world, officially confirmed his appointment as leader, and showed the world that he was serious.

There was even cake and a commemorative coin created to mark the occasion.

OK. What now?

At the ceremony, Dr Ashurbeyli said the next step for Asgardia is to set up a ministry of foreign affairs and a national bank.

"Within the next three months a government will be established, including the ministry of foreign affairs, which will deal with diplomatic solutions to establish bilateral relations with countries on the Earth," he said.

"Once we have a certain number of bilateral agreements, following UN rules we will apply to become a member of the United Nations.

"Other important milestones will be the establishment of the nation's bank and production of the nation's currency. All of this needs to be completed by the end of the year."

He vowed Asgardia would be a reality within 25 years.