For example: File 1 has 5 users changing data in the file. So data from File 1 would start updating, one after the other (I assume.) Meanwhile, File 2 has someone changing data at the same time. So those changes would start updating File 1. Is there a possibility of losing data between the files? Is this the best practice to achieve the goal. I am worried about losing data between the updates. Does this make sense?
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What you would really need to consider is what would happen if 2 or more users are editing the same dataset at the exact same moment. If 2 users open File 1 at the same time and make different edits, then save it back it's likely that the 2nd save will overwrite the 1st one so those edits will get lost.
If you use a database this could be circumvented (or at least managed better)