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How to create this effect in Illustrator? Or any other tool?
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It is a low resolution bitmap effect.
To get an idea how this works, apply a gradient to an object and select: Effect > Rasterize...
Select Color Model: Bitmap and a low resolution (30 ppi or lower).
It is an Effect so you can change the settings by double clicking it in the Appearance panel.
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Thanks Ton, this worked. It took little bit of manual adjustments later, but did 90% of the job. Thanks again for the quick help!
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Good to hear that helped.