Pushing aside the top layer of mulch for a look at the layer that's in contact with the ground reveals one of the soil critters at work, namely fungus, the white patch in the center of the photo. There are specialist funguses that know how to digest wood, or at least start the process, by breaking the bonds in the wood that make other critters unable to digest it. Termites have bacteria in the guts that know how to break the bonds too. Cows have special bacteria in their stomachs for the same reason.
Do you see how the pieces of mulch that are visible in the top layer have broken down into smaller pieces and fibers here in the bottom layer. All part of the soil digesting the mulch.
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