The loot system is really a big criticism of the game. It does not contribute to the flow of the game, it only affects the learning curve negatively and, worst of all, it is not rewarding.
The flow of the game is not so much influenced by the loot system as by item levels. In my opinion, item levels and item strength are irrelevant to the game, since the focus, the part of the game that covers most of the game time, refers to Champion+ difficulty levels and the equipment includes mostly orange items with good properties. So blue and green items are actually only for scrapping and are only “used” for the first few hours of the game at most. So why keep them at all?
The additional properties that higher item levels bring with them do not have much influence on the learning curve of the game. The learning curve should generally be defined by the difficulty levels and not by unnecessary parameters like equipment or character skills. This does not mean that variable character skills or weapon abilities are unnecessary, on the contrary, they provide variety, variety that should be available from the beginning. The ability to challenge higher difficulty levels should be determined only by the player’s skills, nothing more.
Based on this, if you just level up items in general, i.e. get “red items” from the beginning (I would also delete the item traits at this point, but that’s another discussion), you could delete this loot system, which mostly only provides items that are melted down again to get materials that hardly serve any purpose, because you can only use them to make items that you get anyway.
Or you could just skip the part where you get random loot from some boxes and give the player the materials from which you can make the desired items yourself (that would also avoid this annoying opening of boxes). This way you could make the whole game flow much more linear and balanced.
With these materials you could continue to create illusions, change the color of clothes and armor, maybe build the long awaited keep decorations… As @SirKruber mentioned, Quick Play Weaves could provide special colorants (maybe based on the color of the weave) for the just mentioned clothing/armour as a reward and would perhaps offer a greater incentive to play them at all. In Lohners Emporium you would then only buy the blueprints.
Anyway, this would be a complete restructuring and would probably cost a lot of development time. If it is worth it can only be decided by FatShark, but we are only in year 2.5 of the announced 5-10 years of support.