SharePoint Online document libraries keep 500 versions of files by default. The minimum recommended by Microsoft is 100. But why are so many versions kept? The reason is that it leads to better recoverability and underpins features like AutoSave and co-authoring. You might be tempted to reduce the number of versions, but why? I can't come up with a good answer.
If you use Office 365 and store documents in SharePoint or OneDrive for Business, the Office applications can autosave as you work to ensure that you never lose any content. It’s a good idea and the implementation works well. But I have a slight nagging doubt about the network impact for some tenants.