What happens if a country blocked external Bitcoin traffic?
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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