Some say that this denotes a single thread made of two strands twisted together (Sifri; Targum Yonathan). According to this, only one of the seven strings would be dyed blue (Yad, Tzitzith 1:6). This was done by dying half of one of the strings before it was inserted (Teshuvoth Ramban, P'er HaDor 21).
A second opinion is that the word pethil here denotes a doubled-over string (Tosafoth, Menachoth 38a, s.v. HaTekheleth, end, 39b, s.v. U'Posle-hah). This may agree with the opinion that an entire thread was dyed blue, so that when it was doubled over, two out of the eight strings were blue (Raavad on Yad, Tzizith 1:6).
There is a third opinion that the word pethil here denotes the thread that is wound around the others (Rashi, Menachoth 39b, s.v. U'Posle'hah; Rashi on Deuteronomy 32:5). Thus, it was the blue thread that was wound around the others. According to this opinion, the number of blue threads is not defined, and may be equal to the number of white threads. There were thus four blue and four white strings in the tassel (Rashi, Tosafoth, Menachoth 38a, s.v. HaTekheleth).
If the special blue wool is not available, the fringes can be made entirely white (Menachoth 38a).