nix-diff is a Haskell-based CLI tool that compares two Nix derivations (.drv files) or store paths and explains why they differ. It provides both human-readable and JSON output formats, with options to control the diff granularity (word/line/character oriented), limit context, and apply transformations to simplify large diffs. The architecture separates concerns into core diff logic (src/Nix/Diff.hs), data types (Types.hs), diff simplification transformations (Transformations.hs), store abstraction (Store.hs), and rendering (Render/HumanReadable.hs). The tool uses memoization to avoid redundant comparisons and handles relocated Nix stores via the NIX_REMOTE environment variable.