Okay so Lucifer obviously upset his sky-daddy, is demoted from being an angel permanently, is cast down to rule an entire sector of the afterlife called Hell which we come to know where all damned souls go after they die.

What is the logic of God practically awarding Lucifer an entire realm for him to rule on his own and nearly contest God’s power?

That’s like imprisoning someone to home confinement when they live in a mansion.