In my part of the world (northwestern U.S.) the main competition in the folk music area seems to be fiddle contests. They are quite common and each state usually has one, plus plenty of other small town venues - usually in the summer as a tourist attraction. Attached to the fiddle contests, but rarely as a stand alone event, there are sometimes banjo, guitar, and mandolin contests. What seems to happen in terms of encouraging or transmitting folk music is that the fiddlers develop a "contest" culture - ie, certain tunes are considered contest tunes, and certain fiddlers concentrate only on contesting, rarely playing for dances or other types of musical events. The contest tunes tend to be flashier, with many more grace notes, etc. There are also some stylistic elements that creep in - for a while "Texas style" fiddling was a big deal, and then some contests started putting in rules that excluded it. Also "trick" fiddling (double shuffling with the bow, etc.) is not allowed in some "old time" contests. So, there is definitely attention paid to the fiddle culture. Whether it transmits traditional tunes well remains to be seen. Certain tunes seem to be in vogue for a few years and then are gradually replaced with the new lyrical waltz or hot breakdown.
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