Merits are in dev right now but here is my understanding:

1. Solve a problem

2. Submit a merit request for that problem for an amount of merits. 1 merit is always valued at 1 satoshi.

3. Current merit holders vote to approve or reject the request

4. Approval creates new merits owned by your nostr identity. This dilutes the pool of existing merits.

5. When the rocket your merits belong to has a paying customer, that payment goes directly to the oldest unpaid merits. This continues round-robin for all incoming bitcoin/lightning payments so that merit holders get paid directly for their work in a transparent and fair way.

6. Merits may be transferred (sold out of band) to someone else in the identity tree.