In my opinion, the merit system is very good, but it can be improved.
People usually complain that merit sources aren't enough or that merit sources don't give enough merit. If either or both of these are true, then it can be fixed. There can be more merit sources and given more merit. Of course, I'm not expecting it to be just anybody. There are reputable members that can be merit sources.

Also, Smerits don't expire (decay). I think that's a reason why most users don't give out their smerits. If it's possible to make smerits expire after, let's say, 120 days, it might probably encourage users to give out their smerit instead of letting them expire.
Also, for merit sources, if the merits expire, the number of smerit they receive next will be reduced based on the amount that expired or something like that.
It's just an opinion.