In my story, demons evolved from the same core species as merfolk, and then separated from them at a time in their evolutionary process where they were able to breathe above water indefinitely (as merfolk cannot, in my story). They were still able to breed with merfolk, however, and from hundreds of mer-demon unions a third race evolved; the Ckoratinn. They have legs, but webbed feet and hands and fins on their limbs. They are extremely unfriendly to any who cross their path, and tend to live in swamps and lakes that have subaquatic caves. They can breathe out of the water for about four hours, after which their internal organs begin to lose moisture. This particular Ckoratinn is the missing link between blood demons and merfolk, so she lives in waters of about -13 degrees Centigrade. I am in the process of colouring her.