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It is important to process the updates when nodes are inserted into or deleted from the XML tree. All the existing labeling schemes have high update cost, thus in this paper we propose a novel Compact Dynamic Binary String (CDBS) encoding to efficiently process the updates. CDBS has two important properties which form the foundations of this paper: (1) CDBS supports that codes can be inserted between any two consecutive CDBS codes with the orders kept and without re-encoding the existing codes; (2) CDBS is orthogonal to specific labeling schemes, thus it can be applied broadly to different labeling schemes or other applications to efficiently process the updates. We report our experimental results to show that our CDBS is superior to previous approaches to process updates in terms of the number of nodes to re-label and the time for updating.