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Are private Pixelfed photos encrypted?
(lemmy.zip)
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That can be done transparently, just by using a key with no password (or using your account password for the key, so that when you log in it decrypts, and keeps the session open on your device).
The bigger problem is key management. You can't allow the server to know your private key else the admin could steal it. So it has to stay on your device, and if you lose your device or accidentally delete the key, your account is gone.