Eric is asking about the Byzantine Generals' Problem with physical coins and paper wallets.
"Suppose three persons have no access to the internet when they seek to exchange value in cryptocurrency."
"They have only paper wallets and physical coins. How do they overcome the Byzantine Generals' Problem?"
"Afterwards, they [could go] online and update the blockchain with the exchange that took place offline."
"But how does that work? How does that affect the Byzantine Generals' Problem?"
Eric, if you do not have access to the blockchain, then you cannot resolve the Byzantine Generals' Problem,
specifically the double-spend problem, the subset of Byzantine fault tolerance (BFT).
If I am holding crypto coins in a physical device, for example a paper wallet or an OpenDime,
[some kind of physical] token which contains a private key in it.
Let's say I am trying to do a transaction with someone.
How does the other person know the coins on that stick are still available, that they haven't been spent?
This is a difficult problem to solve. Even if I have a full copy of the blockchain...
Let's say I synced [the software on] my laptop before I went on a trip,
and I have the [latest blocks] up to last week.
I can [copy] the Bitcoin address from the paper wallet or stick.
I can verify that, at some point in the past, there was bitcoin [on that address],
But I don't know if that bitcoin has been spent.
A whole week has passed; [my copy of the Bitcoin blockchain is out of date.
I don't have any idea of the current mempool.
I can't solve the Byzantine Generals' Problem. I could still take a risk, but at that point I can't assure myself.
There are some interesting options. If someone presented me with an updated copy of the blockchain..
with proof-of-work, I could then validate up the the latest block issued and have a higher degree of certainty...
that the coins have not been spent.
Not a hundred percent, because I don't know if there is a transaction currently being propagated,
about to [be confirmed] in the next block, that spends these coins from underneath my feet.
But I do know a bit more if I have the latest copy [of the blockchain].
[We must] understand that participating in the Bitcoin blockchain is a highly asymmetric function.
You need to download gigabytes of data in order to receive the blockchain and...
a stream of real-time [updates].
But you only need to upload 350 bytes to make a transaction.
One of the best (most censorship-resistant) ways to do that is with a satellite feed.
You can scale that very nicely, with a [great] number of receiving stations from a single broadcast satellite,
receiving blocks and transactions.
You can transmit your own transactions, which are [about] 350 bytes [each].
You could even use a text-messaging [phone] as a gateway that injects it into the Bitcoin network,
or [some other] low bandwidth transmission system.
The first such satellite transmission mechanism [for Bitcoin] was introduced recently [by Blockstream].
I can envision a situation where you have a field-capable kit and pop open a foldable satellite dish, a solar panel,
a software-defined radio for your laptop, and sync the blockchain from anywhere in the world.
Anywhere that satellite coverage exists, of course.