It's just a private lan game. You can play dota over lan without being connected to the internet. You'll still have your profile items, they must be cached locally. I think the version they play at TI might be tweaked to allow special observer or draft observation stuff, maybe not, they may just use other programs to broadcast the drafts and stuff. I haven't observed a captains draft in normal dota through client in a long time so maybe it's the same.
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I'm just wondering how can it be an offline tournament event. Even though the players can use their cosmetics from their online profile. I'm just wondering... teach me