The SharePoint Versioning is different from Office Document Cache.
For SharePoint On-premises,
When users use office client application to collaborate file, Office Document Cache will be stored in the Microsoft Office Upload Center. After collaboration, users upload the document into SharePoint On-premises, then a new version will be created in the document library.
For SharePoint Online,
When users use office client application or browser to collaborate file, AutoSave will save changes back to SharePoint Online document library directly.
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