We propose a formalism that captures the algebraic structure of many-body two-level quantum systems, and directly motivates an efficient numerical method. This formalism is based on the binary representation of the enumeration-indices of the elements of the corresponding Lie algebra. The action of arbitrarily large elements of that algebra reduces to a few bit-wise exclusive-or operations. This formalism naturally produces sparse representations of many-body density operators, the size of which we control through a dynamic truncation method. We demonstrate how this formalism applies to real-time evolution, dissipative Lindblad action, imaginary-time evolution, and projective measurement processes. We find that this approach to calculating quantum dynamics scales close to linearly with the number of non-zero components in the density operator. We refer to this exclusive-or represented quantum algebra as ORQA. As a proof of concept, we provide a numerical demonstration of this formalism by simulating quantum annealing processes for the maximum independent set problem for up to 22 two-level systems.