Unlike most martial arts, BJJ does not have a formal method of promoting its students to the higher rankings. We still maintain a typical hierarchy of belts which is in increasing order, white, blue, purple, brown and black. There are belts that exists beyond the black however these belts are reserved for practitioners of tremendous skill and typically people who have a lot of power and influence in the BJJ community.
In the absence of a formal way to promote people like in other martial arts, the grading is mostly left to the discretion of the instructor. Typically your instructor will promote you once you display a very good understanding of BJJ and are skillful on the mats. It is not uncommon for instructors to promote their students to blue after they win a competition that they have been training for.
The normal time it takes for a white belt to progress to blue is around 1 and a half to 2 years which is roughly the same time it takes to get a black belt in taekwondo. Therefore it should also reflect that the skill level demonstrated by a blue belt be of a much more significantly higher level than that of a white.
Timeline of belt: http://2.bp.blogspot.com/_qUx-QzegM6M/TGsJbqtCG-I/AAAAAAAABAo/jhfRPduMloE/s1600/BELTS+OF+BJJ.jpg
The skill level of a blue belt should be at a level such that a white belt does not pose any threat to him. His skills should be more polished and refined and instead of a very one dimensional view displayed by many novices, the blue belt should always be 2 steps ahead and have multiple plans for different scenarios.
In my opinion, entering competitions increase your confidence and skill levels faster than anything else. Namely because you train harder for competitions, you get used to the pressure and grappling in class doesn’t seem so scary anymore, you are more willing to take risks because you appreciate the difference between making mistakes in the gym and making mistakes in the competition ring and even if you lose in the competition, you can proudly say that you put yourself out there and did your best and whatever mistakes you made will become super glaringly obvious. These same mistakes you might never have truly looked at and scrutinized had you not competed.
White belt competition: http://www.bjj-chelmsford.co.uk/wp-content/uploads/2014/02/FirstEssexSubmissionOnlyBJJCompetitionResults.jpg
The road to blue will not be easy, you will lose and lose and lose during training, you will feel like you are going nowhere because you are always losing. If you are always winning you are either grappling the wrong people or you are truly a gifted grappler. Personally I’ve seen someone who I truly believed would not make it very far but through solid determination and hard work he is now a very accomplished purple belt and could probably dominate me with his eyes closed if he wanted to.
Hard work, consistency, blood, sweat and tears definitely pays off in this sport. It is ok to lose. Rest assured you are getting better even if you don’t feel like you are.