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The main diff matching/patching I believe this is what they use github.com/google/diff-match-patch. As it is developed by them. For the styling part ex, bold/italics and etc. I do not know exactly what methods they use to calculate. But by looking briefly on the API calls made from docs when you update the doc. The image below is what the call looks like when I press g.

Now when I bold some part of the text Girish patil, The request looks like this.

My guess is, they follow that structured update along with the diff-match-patch (For ex. in above ts_bd_i: false which I believe is bold and italic while ts_bd is set to true). They might be using both in conjunction.