I guess nostr will fail to scale gracefully.

You could have just one single relay for storage, if scale is the issue.

Another benefit is that there might be multiple clients that can be used to retrieve the passwords, so that bitrott of unmaintained clients isn't an issue.

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Single relay goes against redundancy.

still not bought into the idea, if you use nostr as a transport, the client still need to implement some logic on top.