You can read more about the implementation here: https://sdocs.dev/#sec=short-links
Briefly:
https://sdocs.dev/s/{short id}#k={encryption key}
└────┬───┘ └───────┬──────┘
│ │
sent to never leaves
server your browser
We encrypt your document client side. The encrypted document is sent to the server with an id to save it against. The encryption key stays client side in the URL fragment. (And - probably very obviously - the encryption key is required to make the sever stored text readable again).You can test this by opening your browser's developer tools, switch to the Network tab, click Generate next to the "Short URL" heading, and inspecting the request body. You will see a base64-encoded blob of random bytes, not your document.
Re URL length: Yes... I have a feeling it could become an issue. I was wondering if a browser extension might give users the ability to have shorter urls without losing privacy... but haven't looked into it deeply/don't know if it would be possible (browser extensions are decent bridges between the local machine and the browser, so maybe some sort of decryption key could be used to allow for more compressed urls...)
I.e. .md -> gzip -> base64