"Compounding" refers to the process of earning or generating additional returns on an investment over time by reinvesting the initial investment and any previous earnings.

It involves taking advantage of the power of exponential growth.

In simpler terms, compounding means earning money on your original investment and then earning even more money on the returns you've already made. It's like a snowball effect, where your money grows not only based on your initial investment but also on the gains you've accumulated.

The concept is often used in the context of financial investments, such as stocks, bonds, or savings accounts. By reinvesting the profits or dividends earned, the investment can grow at an accelerating rate over time. This can significantly enhance the overall return on investment and contribute to wealth accumulation. In summary, compounding is the process of earning returns on both the initial investment and the previous returns, allowing your investment to grow faster over time.

https://www.dbm.academy/faq for more blockchain vocabulary.

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