Encrypt Wallet Private Key with User-Defined Password During Signup Flow

[pmora3003]

✨ Objective

Redesign the user creation and wallet generation flow to enhance security and control. Currently, wallets are created at the time the admin registers a user, and the private key is encrypted using a generic password ("1234"). This issue aims to:

• Delay wallet creation until the user completes their signup process.
• Encrypt the private key using the actual password chosen by the user.
• Implement an email-based OTP (One-Time Password) to verify email ownership before setting the password and creating the wallet.

🛠 Tasks

📬 1. Initial Admin User Creation

• The admin creates a new user with an email.
• No wallet is generated at this stage.
• Backend sends an email to the user notifying that an account was created and prompting them to complete signup.

🔐 2. Email Verification + Signup

• Implement a new frontend page: Frontend/app/sign-up/verify.tsx
• User accesses the page via a link with a secure token (sent by email).

Page asks the user to:

• Input the OTP sent to their email.
• Set a new password.
• Upon OTP validation, the user can proceed.

🧠 3. Wallet Generation with Password-Based Encryption

Once the password is set:

• Generate the wallet.
• Encrypt the wallet's private key using the password the user provided.
• Notify core team to store the encrypted private key in the database.
• Associate it with the user account.

🔄 4. Remove Generic "1234" Encryption Logic

• Eliminate or refactor any code that automatically encrypts private keys with "1234" during initial user creation.

💻 Files to Modify

Frontend

• Frontend/app/api/users/route.ts — Remove wallet creation from this route.
• Frontend/app/sign-up/verify.tsx — New signup screen for password + OTP.
• Frontend/app/auth/ — Adjust logic for password setup and encryption trigger.

Backend

• Backend/routes/user.js — Update user creation logic.
• Add a secure OTP flow for email verification.
• Add logic to generate and encrypt wallet with user password.
• Ensure secure encryption method is used.

✅ Acceptance Criteria

• User receives an email with OTP and signup link.
• User verifies email and sets a password.
• Wallet is generated and private key is encrypted with the user's password.
• Encrypted private key is stored securely in the database.
• No default or hardcoded password encryption is used.

📦 Resources

User Creation Logic: Frontend/app/api/users/route.ts

[dharapandya85]

Please assign this issue to me.

[tusharshah21]

Hey @pmora3003 , this look like job to me, was curious to know the task defined is the path progress? If it is then I would love to have a look into it and complete it. ETA: not sure need to cross validate few times, could be 36 hours if I needed your help, else 24 hours