Seeing you mention Mangrovia in the recent 'what if' for the Wither AU, I am now more curious as to your headcanons and lore behind it :D
Mangrovia in the series is presented as the empire of the viewers. Now, when worldbuilding this into a fantasy-setting, it can't exactly be 'of the viewers'. So I've been thinking about this a lot and especially about how to make it work, and I think I've found a way.
Mangrovia is located pretty central compared to the other empires because it's literally spawn. Therefore, my headcanon is that it is basically a trading hub. The shortest trade route, especially to empires that are farther away, often leads through spawn. Over the years, people settled the area, it became almost like a place to stay the night, if the journey was long, and maybe trade a little.
Over time, this grew into a small settlement, into a village, into a town or small city with its own set of rules and regulations. Here you find the biggest market for all kinds of goods from all over the empires. The main customers are other traders or those who can come to visit Mangrovia and its market, and the citizens of Mangrovia are almost all descended from traders who decided to settle down in the area and raised their families there.
There have been instances in the past where empires tried to claim Mangrovia as part of their empire. It was easy to dissuade these rulers - what can you do when Mangrovia decides that your traders are no longer welcome there or allowed to pass through its streets? All empires decided to leave Mangrovia as an independent city and, as a clause in the signed trade agreement, to leave it to its own devices.
Mangrovia itself does not really have an export that they are known for. Their main source of income is, of course, trading. Mangrovia charges toll for traders that pass through (not for visitors), rents out stands on the various marketplaces and additionally takes a minimal cut of the money traders make. It is said it has some of the most rigorous tax laws and policies. Almost all traders comply with these rules - it's compliance or not being able to make a living in this city. Furthermore, traveling traders sometimes do need a place to stay and spend the night. Most of the money goes into further imporvement of the road network and other infrastructure. The one thing they'll never invest in is a Nether portal, because "it only invites evil". As such, without ready access to the Nether, Mangrovia was largely spared from the corruption, because Xornoth kind of overlooked it or underestimated the power of this small city. Or maybe they assumed it belonged to one empire and left it alone. We will never know and the people are left to speculate.
Its streets are filled with people from all over the world. There is no such thing as a stereotypical native Mangrovian, because this is kind of a melting pot of all kinds of cultures. They are quite a tolerant people and are very conscious about their spending habits. Leaders are democratically elected into a council consisting of seven members, two of which must have been traders by profession and four of which must be Mangrovian. One is considered Mangrovian when you are either born in the city or have been living in the city for a minimum of twenty years. You can be elected twice, for a term of five years. Every year, at least one and at most two seats in the council are up for grabs. While you are a member of the council, you are expected to stay in Mangrovia.
It's a not very present and quiet, but powerful force in the world. It's come to the point where nobody wants to piss off Mangrovia because, well, your merchants and traders might lose access to the city and its services. For example, if Mezalea isn't in good graces with Mezalea and needs to send something over to the Overgrown, it can't pass through spawn. It either needs to go by ship to Mythland and through Gilded Helianthia, or it needs to make the taxing journey through the jungle, past the Lost Empire or Undergrove, and then through the Grimlands, the Crystal Cliffs and Rivendell. It has come to a point where it is easier, quicker, and more cost-efficient to travel through Mangrovia than it is to make that long journey around the existing road network, which is just a massive, costly detour at that point.
So, those are my headcanons and lore for Mangrovia. We kind of tend to forget it is a thing (at least, I do) but it is quite an interesting place, especially within the series itself and how it could potentially interact with the empires.