While I am not sure where the sensors are, it works on the same principles as an ABS system. There is a tone wheel that the brake controller uses to count revolutions of the wheels. As long as they are within a +/-X number of revolutions it doesn't do anything. When they exceed that amount it will apply the brake to the wheel that is slipping until the revs get back within the tolerance band.
This, unfortunately precludes "defaulting to full lock" as that would mean locking the brake down which would stop the machine.
If you lose a sensor, you will still have 4WD it will just be 4WD with an open front diff. So if you lose traction on one of the front wheels, it will spin and the other wheel will not be pulling. You will still have the rear wheels locked and should have traction there.
The true locking diff in the standard and Deluxe models is superior from that as well as a pure torque to the ground standpoint but they require you to stop and lock before getting into a mess where this design lets you get out of a mess that you have gotten into without stopping.
Ya hear ya but my thought would be that it would still have diff lock capabilities and that would take over if the traction control failed.
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