Am I missing something? This already exists in Google Docs. Much easier to implement when the doc is database-backed (recording every keystroke for OT) vs file-based.
The Docs versión history tooling is pretty weak, though — you have to repeatedly select a timestamp. You can’t scrub, and you can’t even click on text and get “who put this here, when?”
Yeah, the thing is, you can't do this in a file-format-agnostic way (you need to know what a Word doc or an Excel sheet is), which makes the file system layer the wrong level of abstraction to consider.
The diff when database-backed is still going to be file-format specific because a text-based document will not be stored in a DB identically to a spreadsheet.