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Bit-differencing (also called delta-blocking) is the technique of only sending the changes to files over a network.
Imagine a word document is being replicated over the internet from point A to point B. The document already exists at point A and point B, however in the last hour a user has added a line of text to the document. The file has changed, but instead of sending the whole file again, we just send the extra line.
The changes to files are immediately applied at the other end, so that as soon as the process is complete, you have two identical files.
Bit-differencing has been available for some time, but not all systems use it. Additionally the changes themselves are compressed when being sent - to ensure the absolute minimum amount of data is transmitted. This becomes crucial when dealing with a slow connection (the internet) and large volumes of data.
We use bit differencing when transmitting over the internet and, optionally, when backing up data from computers on your LAN.
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