If you do something like:

  echo "hello world" >> dummyfile
  cat dummyfile | sed 's/hello/goodbye/' > dummyfile

dummyfile will be blank afterwards

if you do:

  cat dummyfile | sed 's/hello/goodbye/' | sponge dummyfile

It'll work as you'd expect (or at least as I'd expect). Otherwise `> dummyfile` will truncate dummyfile before it's read and inputed into sed.