It was only December when the entire decentralized finance (DeFi) market was worth less than $700 million. Early this morning, it hit $1 billion, a figure that even the most fervent blockchain skeptics would have a tough time dismissing as meaningless.

That figure is the measure of all the crypto held in projects that lend, hedge, abstract, swap or otherwise make structured bets using ethereum’s smart-contract powers, as totaled by DeFi Pulse, which first showed the collective market at $1 billion at 8:00 UTC Friday.

To be clear, $1 billion is not how much money people are making on DeFi, but how much they have committed. Their “locked-in” collateral is used on various protocols to make a wide array of bets, from simple loans to complex derivatives.

At press time, the figure had dropped back to $993.3 million, but the billion-dollar milestone has been broken nevertheless, and most people in the space believe it’s a sign of greater things to come.

“It proves that people around the world want access to more efficient, less biased, money,” Rune Christensen, the creator of DeFi leader MakerDAO, told CoinDesk via a spokesperson.

MakerDAO has consistently held the top spot on DeFi Pulse, as the protocol with the most ETH as collateral – some 60 percent of the market.

“$1 Billion marks an important milestone for DeFi to be celebrated,” DeFi Pulse wrote on its blog. “Additionally, $1B feels like an early birthday present for DeFi Pulse which was launched in February 2019.” The website has become something of a standard in this nascent industry.

DeFi Pulse was not alone in its bullish tone. Investor Spencer Noon of DTC Capital struck a similar note in an email to CoinDesk:

"No other smart contract platform comes close in terms of its developer mindshare, tooling, and infrastructure, to the point where I don’t believe DeFi could exist anywhere else today. And perhaps most surprisingly, we’re finally seeing a credible case for ETH to accrue a long-term monetary premium as the only truly trustless collateral type in decentralized finance."

Total Value Locked in DeFi, Feb. 7, 2020. Source: DeFi Pulse

Unpacking $1B

Each hour, DeFi Pulse totals all the ETH and ERC-20 tokens locked inside public DeFi protocols and logs the “total value locked” (TVL) on a graph at the top of the page.

Of course, that number is mostly ETH, which currently represents 70 percent of the value. As such, the number can be a little misleading because denominating it in dollars exposes the figure to crypto’s volatility. In other words, a hard spike in ETH prices (the asset is up 21 percent over the last week) would drive TVL up even if no one else put any more coins in.

In fact, when weighed in terms of locked-up ETH, the chart line is going down, not up, over the last seven days. “Of course some of the DeFi milestone is due to ETH appreciation, but, regardless, we have crossed the inflection point between the bear markets of 2018 and 2019 and are poised for a bull market in 2020,” CoinFund’s Jake Brukhman said in an email.

ETH Locked in DeFi, Feb. 7, 2020. Source: DeFi Pulse

Ryan Sean Adams, a crypto investor and ETH booster on Twitter, tweeted the news, writing: “Software eating money. Software eating banks. The next decade will be wild.”

But nothing big happens on ethereum without bitcoin diehards mocking it. In this case, former bitcoin developer Peter Todd weighed in, tweeting, “Decentralized smart contracts can’t hold people accountable for debt. For that you need guns.”

Either way, a billion dollars is still tiny. Just take commercial lending in the U.S. alone. That’s an $800 billion market, according to data firm IBISWorld. DeFi has a long way to go.

And rapid growth doesn’t always continue. For comparison, Kickstarter, the leading crowdfunding site, launched in 2009. It hit $1 billion in pledges in 2014. Six years later, it still hasn’t quite touched $5 billion.

Still, DeFi got there a lot quicker, and it’s much more complex than crowdfunding.

“This historic milestone is a large part due to numerous factors that have coalesced,” Felix Feng of Set Protocol, which automates investing, told CoinDesk in an email. He sees improvements in things like composability and smart-contract security bringing more users in.