Optimizing Directory Path Bar

I'm working on a complex project in insert language here, which involves creating a simple directory viewer, similar to Windows Explorer or Mac Finder, but much more simple.

I'm not sure where and when to "minify" or "shorten" the path bar (on top) to show all available text. This is a software design question, not a "how do I program this" question.

image 1 Shown above is one arangement. The middle black bar can be slid left and right to resize the two separate directory selectors. User can select a file item to open, and click a top directory to change the current directory. Note that the right directory selector is cut off, that is what I'm going to fix. I need to either shrink, shorten, or cut of part of the text to show the first and last folder in the path bar at all times.

image 2

Here is another example, but the bar now moved left. The right directory selector is now fine, but the left is now cut off. I will modify the left path bar in some way so, again, the first and last always show fully.

Here's the question. How should I cut / minify the path bar? I have a few ideas, but I'm unsure which will be easiest to the user and most usable:

  1. Cut text out of a middle directory and replace with ellipsis (but which directory, and do I split this out over many, or the directory with the longest name, etc).
  2. Shrink the text in a middle directory (again, which directory do I select for this: the middle most? uppermost? (excluding the first) all at the same time?)

Side note: Ignore the clash-y colors of the project, they'll be changed.