Yes we need to change the encryption algorithm. This is just an proof-of-concept that is still being worked on.
2. You haven't proved the concept if you're not handling your key material right - among other things, if I'm still reading right, it looks like you're using the (asymmetric) wallet private key as the (symmetric) encryption key for passwords? Is this in any way safe? (Traditionally, the overwhelming consensus of the cryptography community is no.) If you need to generate new keys and unique nonces and verify IVs, you need to figure out how and where you're storing a key before you've successfully proved the concept.