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For me the big step-change was the successful front-lighting of e-ink, that is what made me take the leap from paper to ebooks. All the other improvements in pixel density, contrast ratio, processor speed, etc. have been minor in comparison to that.
But the area that I see as having the biggest room for improvement is on the publishing side. If publishers could manage to work out how to consistently produce ebooks without spelling and punctuation mistakes, and without glaring formatting errors, then that would do more to improve my reading experience than any hardware or software innovations ever could.
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