Vetstad is called a nation is simply because there’s no other word that describes it better. It’s a forested region of the mountains, sandwiched between Celymnur and Kosovar. There isn’t a defined border; Vetstad exists where it’s neighbors run out of energy to do anything to govern the land and it’s residents.
This is where the mages go to be left alone. There aren’t many of them; most “magic” in Davyyld is done by enchanting items or binding elements to objects. There aren’t many people who can fling a fireball or throw lightning bolts. But there are a few, and most of them like to be left alone. So, they started moving here. The rugged mountains discourage visitors, and there are many ruined watchtowers and fortresses from back when the bigger nations cared about their borders here. Once a few wizards had successfully settled in, word got around (after all, it’s a small community) and more and more of them showed up. Since it’s not worth the hassle to do anything about it, and they aren’t exactly doing any harm, everyone has been content to let them stay there.
For the few citizens born with a natural aptitude for directly manipulating the unseen energies that skim the surface of the planet, the long and difficult quest it takes to find a mage willing to take on an apprentice is considered the first part of proving they’re serious about it.