This is looks super cool, however not something I'd be interested in using myself if I can't selfhost it (at least it looks like thats not possible from the website).
If you're hosting the service, there's no need for data to be encrypted client-side. Unless, of course, you were intending on running the service on a public cloud which you didn't control, but that's something I don't think many privacy conscious folk would do.
There's plenty of open source, self-hosted alternatives to Google Photos.
Of course it's still possible that an update could be sent to everyone which contains some code that only runs when a certain username is entered, so users would need to avoid updating the app until an audit by a trusted third party had approved it.
For web apps, the situation is even more difficult, but there is a technique called Secure Bookmarks which allows you to confirm that a specific bundle of JavaScript is running (at the expense of some usability):
Most likely, QoS would be better from ente's hosting and I would be inclined to take advantage of that. An open source server can be audited and offer an off-ramp should their service no longer suit me.
Then again, the economics of enabling self-hosted infrastructure are probably less exciting compared to locking users in to marked-up, white-labeled infrastructure.
On the business side, there's plenty of companies that have offered and succeeded with self-hosted software. On the client side, there's many individuals like myself willing to dedicate time, money, and effort to self-host services. I spent quite a bit of time setting up my NAS with self-hosted services, not only because the number of photos and media I store would be prohibitively expensive to host elsewhere (I do photography and videography as a hobby, 120 fps 10 bit footage adds up), but because I enjoy the hobby.