In my dojo it used to be a combination of 3 and 1 - mostly 3 for kyu-grades.
Lately (the past 5-6 years) there has been developed a more formal set of rules regarding promotions, so now we mainly go by the no. 1 scenario.
I like it the way it is now. A grading helps you to focus your training and at the kyu-levels gives you a challange to learn new things, that you maybe don't get to practice much otherwise. This is by far the most sensible and practical solution in my point of view.
From an ideal point of view I would prefer the no. 3. scenario. It's sort of more 'pure' unless of course personal preferences and likes/dislikes makes a difference.
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