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Say a country decides to completely sever itself from the outside world, like so. Assume no leaks. As I understand, once the local miners process all the international transactions in everyone's' mempools, they'll be left with only local transactions, blocks, nodes, and miners. A (long) while later the difficulty adjusts downward, and you now have a local, codeless, lower-POW "fork" of BTC, even though it's the same code-wise. Travellers can go there and spend their pre-fork balances there again, either sending it to another address they own, or send to locals, though it's obviously severed from whatever transactions they performed outside this country.

Assuming they keep up-to-date with the codebase only, and they do this for a long time, say a year and more, what happens once connectivity is restored? Is their local chain just completely wiped out due to lower POW? Would local nodes be forced to go back to the time of the fork and download international blocks? All those valid transactions at the time, gone? And roles reversed, what if this country amassed enough mining power to have more POW?

And as a bonus question, how would Layer 2 solutions, assuming they were the only traffic that could cross the border the whole time, affect this scenario? Could you load funds onto the Lightning network from both networks, and effectively double your balance by withdrawing them on the outside network?

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Is their local chain just completely wiped out due to lower POW?

Yep. Lower proof of work means orphan, invalid chain.

Would local nodes be forced to go back to the time of the fork and download international blocks?

Yes, because the chain they followed before they reconnected, has no value after the re-connection.

All those valid transactions at the time, gone?

Yes. This is also why the 51% attack is bad. One with more hash power could

1) cash out their coins

2) publish the new, alternative chain with more PoW

3) start mining secretly again

4) repeat until the coin price decreases enough to make mining inefficient

And roles reversed, what if this country amassed enough mining power to have more POW?

Then everyone loses money. This'll also indirectly affect Russia because of the changes in coin price.

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