Exactly! The existence of something like a reliable Internet depends on some form of physical civilization with laws and law enforcement, not to mention food production and distribution required to keep the netizens alive.

Will some aspects of life move from the physical to the virtual? Sure; they have and they will continue to some extent. However, there is a limit. Cyberspace cannot exist without physical space. If you want to ascend into some kind of purely spiritual existence, you need to look elsewhere than technology.

This is what I meant. You need something to force people to internalize externalities, and to provide goods that wouldn't otherwise get made.

Market failures are a real thing, and you need some sort of institution to address them. The internet does nothing to change this, except that it makes it possible to create more discriminating policies that are more efficient (in theory).