Components have the following types of versions:
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Marketing version; in other words, the version the merchant interacts with.
Your initial version might be 1.0.0 or 2.0.0, for example. You should follow [our versioning policy]({{ page.baseurl }}/extension-dev-guide/versioning) guidelines when setting your version.
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Composer version; in other words, the version of each module, theme, language package, third-party package, and dependencies.
Using Magento code as an example, {{site.data.var.ce}} marketing version 2.0.0 includes component versions such as 100.0.1, 100.0.2, and so on. These versioning strategy prevents collisions between the marketing version and component versions.