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How to show username instead of "System" in timeline..
I assume you're marking opportunity as lost from front end, not from any custom code.
Is there any plug-in registered under opportunity? If so, disable them and try to update the status and see the result.
It seems the process that is involved in marking the opportunity as lost is executing/running under system user context. If losing the opportunity is being done by using any custom code/plugin, then run that logic under context of user(initiating user).If you would default CRM functionality as it is, then you would see desired behaviour.
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