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When people send you sMerits, your Merit counter builds-up, getting an additional amount of sMerits to award to others, equal to half of the Merits your counter has increased. In other words, for every two Merits your counter increases, you get 1 sMerit to send.
The above means that the sMerits are limited and the overall amount is reduced with each meriting transaction (i.e 4 sMerits -> generates up to 2 sMerits -> generates up to 1 sMerit).
But … Merit Sources are there to the rescue, pumping new Merits into the system. Merit Source’s have a Merit Source sMerit counter (in additional to their personal sMerit Counter). They typically receive each month a certain amount of sMerits out of the blue (i.e. not originated by receiving a sMerit TC themselves), being the monthly allowance variable per Merit Source. The allowance can vary between something like just over a dozen for the very small ones, to hundreds, and a few are around 1K/month. The allowance is adjusted every one in a while, and a Merit Source may see an increase or decrease in the allowance, depending on historical distribution data.
The amount per source is not publicly known, but the total adds up to 21.171 sMerits for the current 97 Merit Sources (
https://bitcointalk.org/index.php?action=merit;stats=sources). The Merit Sources are not publicly disclosed, but it’s pretty easy to know which ones are the major ones. There’s also a thread on Meta that has most of them tracked (I won’t disclose the thread here, but anyone searching Meta can find it after a while).
The process for postulating to become a Merit Source is described in the above posts. Additionally, some Merit Sources were hand-picked by @theymos, without them needing to go through the formal process, specially those in the first batch. Merit Sources are added once in a while (they can also be removed), but there is not predetermined timeline.