You have to WIN with a Mark in order to exchange it for one you lost.
I know this. The suggestion I have is much more punishing though.
The game becomes very different. Suppose that losing deflag and steal at the same time opens you up for counterbuilding.
Current style 12 lives promotes building good decks and winning with them. If you lose deflag and steal round 1 you can exchange worse elements that you won with for one of those elements. You lose 2 lives but you can get away wit it.
You often just wanna play a good deck.
With my suggestion its more about sacrificing elements that you don't mind losing. If you chose to play a dark mark deck and a fire mark deck in round 1 and lose both, you risk being counterbuild in the future. You are forced to pick very carefully. My suggestion leads to people choosing elements they can afford to lose early and counterbuilding being done in the tournament later. In round 1 you may think "I can afford to lose element X so lets play that first".
Just sharing an idea.