WHAT HAPPENED TO DECKARD?
K finds Deckard after having the wooden toy horse he has cherished since his (memories of) childhood analyzed for radiation. Real wood being a rare commodity in this future, the amount of radiation indicated that the wood the horse was whittled from came from Las Vegas. K finds Deckard in an abandoned casino where he has apparently been hiding for the last 30+ years. Wallace's forces track K to Las Vegas and to Deckard; they take Deckard prisoner while K is left to die and is rescued by members of the Replicant Underground.
It's revealed to K that the surviving child of Deckard and Rachael was actually a female. Meanwhile, Deckard is held captive by Niander Wallace himself, who taunts him with the possibility that as a Replicant, Deckard was programmed to meet and fall in love with Rachael. Wallace even provokes Deckard with a brand new Replicant of Rachael (with Sean Young's face perfectly de-aged and overlaid via CGI over actress Loren Peta). The new Rachael is physically identical in every way to the original except... "Her eyes were green," Deckard says as he rejects her. Rachael sadly dies a second time when Wallace has her executed and sends Deckard to an off-world colony to be tortured for information as to where his child is. K rescues Deckard before he's sent off world and, having figured out who the child really is, K brings Deckard to meet his daughter.
WHO IS DECKARD AND RACHAEL'S CHILD?
Sadly for K, who believed wholeheartedly throughout Blade Runner 2049 that he was born and not made, he figured out the truth: his childhood memories were real, but don't belong to him and were illegally implanted in his mind. The memories belong to Dr. Ana Stelline herself. Stelline, who lives isolated in her lab, grew up in the scrap yards of San Diego after being smuggled there by the Replicant Underground. She was meant to escape Earth for an off-world colony, but an auto-immune deficiency prevented her from travel and forced her to live in a sealed off chamber. However, being a genius at memory creation and design, she became a foremost memory designer and eventually sub-contracted herself and her company to Wallace, designing artificial memory implants for his new line of Replicants.
It's unknown how K himself ended up with Stelline's specific childhood memory of being bullied and chased by other children through a San Diego scrapyard and hiding the wooden horse in a furnace, where it remained for over 20 years until K uncovered it, believing it to be his. It's also not known how much Stelline herself knows about her true origins. However, with Deckard believed dead and delivered to Stelline thanks to K, father and daughter who have never met have some time to get to know each other and have pivotal questions finally answered. As K says about the woman who shared her childhood memories with him, "All the best memories are hers."