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Amazon seems to do generations in a more global sense - sort of like a set of devices - so currently for sale from Amazon are 8th generation devices (kindle oasis, kindle (basic)) and 7th generation devices (kindle voyage, kindle paperwhite). There was a 7th generation kindle basic, but that was replaced by the 8th. The generation seems to have less to do with the hardware, and more to do with when the device was released.
For the software version, I am guessing it's sort of like PC operating systems - as machines age, they might not have the hardware to run the latest and greatest OS - probably the same deal with the kindles - if a particular version can't implement what's added in the new software properly, it doesn't get the upgrade. (obviously with some exceptions - such as the autodimming feature on the Voyage, which is exclusive (so far) to that model.
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