Participation trophies get a bad rep, and perhaps rightly so. Participation in itself shouldn't really be cause for reward. But, it does have one idea right in concept, and that is that winning is not everything, especially with kids.
Even if the ultimate goal is to be the best, winning isn't everything. It's something we can't control, all we can control is ourself and our own effort.
The thing is, in the long run effort, attitude and persistence will always win over talent when those things aren't there.
When we have a talented white belt that is great, but, the unfortunate thing is a lot of talented white belts do not follow through to becoming talented black belts. And a lot of untalented white belts turn out to be very talented black belts.
Attitude, effort and determination decides who gets to reach high level of skill, because even the most talented white belt is still a white belt.
Martial arts training is not a sprint, but a marathon and who is ahead at the 1 mile mark doesn't matter as much as who actually finishes the race. Same as everything in life, effort and persistence will win over the person that got a early lead.
While we will give awards for winning, the awards for attitude and effort are equally important. Those are the things that determine long term success.
We can't control our natural talent, we can't control our opponents talents, the only thing we can control is the effort we put in, that's what we should encourage and recognize in kids.