You're prob not violating ToS since you're not doing it for commercial use, and you're actually reinventing the wheel as a couple of options for that are already available as community plugins. I've been using Remote-save for a while with a almost free private S3 bucket and encryption to sync between my computers and phone for a while.

https://github.com/remotely-save/remotely-save

It supports more than just S3 (as is listed in the README), its just what I use.

That said, what you made is pretty cool. I guess you're trying to replace the API/backend similar to Vaultwarden does with BitWarden paid service.

For me, its not that I can't afford $8 a month, its just that $8 is to me fairly steep for basic file storage and sync I get for free from some services. $12 a year would be a fair price to me. I get some of it goes to support Obsidian development, but still seems steep, $2-3 a month would be something I'd subscribe for.