I am thinking of creating a cloud-based document archive. The intention is to make it impossible for the system to read the users' files, and be more than just a storage provider.
Looking at this question, there are some ways to do this, but effectively this limits the archive system to be just a "dumb" storage provider: Only on your own machine will the data make sense after decryption.
For trusting that the storage provider will not laugh at your embarrassing holiday pictures, this approach is rock solid. But the problem is that you won't have the convenience of a less secure system like dropbox, google drive or neat.com.
These systems (let's call them "smart") index your data for search, have handy in-browser document viewers, etc, which I want for my system.
But providing a web-interface to users' data means that the web server must be able to serve unencrypted files (or thumbnails).
For storage, I was thinking of using asymmetric (RSA) encryption of symmetric encrption (AES?) secrets on the central server. Each file is symmetrically encrypted with a per-file secret. Those secrets are encrypted using the public key. The private key needed for decrypting a file's secret (and thus decrypting the file) is encrypted using a secret based on the user's password.
This means that files can only be read by the server if the decrypted private key is kept in its decrypted form for the duration of a users session. Similary, indexing and generating thumbnails for stored files/documents can only be happen while the private key is "unlocked". This design is easily expandable to accommodate application-specific passwords (create an encrypted private key per password), in case I ever want to develop apps besides the web interface.
My question is: How fundamentally (in)secure is this design?
I'm not sure if I understand your problem. There seems to be a contradiction in your goals vs. solution.
You'd be better off generating the metadata at the time of encryption on the user's workstation. Then upload the metadata plaintext along with the encrypted data. It's not future-proof, so choose your metadata carefully.
To share the file, encrypt the keyfile with the recipient's public key and upload it.
Never give the plaintext keyfile to the server.
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