The Archivist uses the standard Client SharePoint Object Model (CSOM) to faithfully copy the document binary from the source location to the target archive. That's how we get it to work with remote SharePoint farms and SPO.
When version history is to be archived we implement a strategy of replaying history. We start with the original source document and copy that to the archive and then work through each source version and send that to the target as the next archive version. When the document has been faithfully archived the original source document is sent to the recycle bin.
To find out more please refer to the detailed
User and Administrator documentation reference guide.