A healthy Bitcoin loan should never become more valuable after it starts failing.
That is the incentive boundary I would examine in Trustless Bitcoin Vault markets connected to BabylonLabs_io.
Every participant should benefit from restoring a healthy position as early as posible.
But if larger penalties, higher rewards, or wider liquidation discounts appear only after a position deteriorates further, the system creates an uncomfortable question:
Does anyone earn more by waiting instead of acting?
Incentives should reward fast stabilization—not delayed intervention.
Otherwise, the protocol may unintentionally encourage economic behavior that increases borrower losses before resolving them.
For me, strong TBV design is not only about defining liquidation correctly.
It is about making the economically rational action the same as the safest action for the market.
When incentives and stability point in the same dirction, native BTC lending becomes far more resilient.$BABY @BabylonLabs_io #baby $HYPER $HOME