diff --git a/Dockerfile b/Dockerfile
new file mode 100644
index 0000000..f16951c
--- /dev/null
+++ b/Dockerfile
@@ -0,0 +1,70 @@
+# Multi-stage build for LiteCloud
+
+# Stage 1: Build the Rust backend
+FROM rust:1.70-slim as rust-builder
+
+WORKDIR /app
+
+# Install build dependencies
+RUN apt-get update && apt-get install -y \
+    pkg-config \
+    libssl-dev \
+    && rm -rf /var/lib/apt/lists/*
+
+# Copy Rust project files
+COPY api /app
+
+# Build the Rust application in release mode
+RUN cargo build --release
+
+# Stage 2: Build the Flutter frontend
+FROM debian:bullseye-slim as flutter-builder
+
+WORKDIR /app
+
+# Install dependencies for Flutter
+RUN apt-get update && apt-get install -y \
+    curl \
+    git \
+    unzip \
+    xz-utils \
+    && rm -rf /var/lib/apt/lists/*
+
+# Install Flutter
+RUN git clone https://github.com/flutter/flutter.git /flutter
+ENV PATH="/flutter/bin:${PATH}"
+RUN flutter channel stable && flutter upgrade && flutter config --enable-web
+
+# Copy Flutter project files
+COPY frontend /app
+
+# Build Flutter web app
+RUN flutter build web --release
+
+# Stage 3: Final image
+FROM debian:bullseye-slim
+
+WORKDIR /app
+
+# Install runtime dependencies
+RUN apt-get update && apt-get install -y \
+    ca-certificates \
+    && rm -rf /var/lib/apt/lists/*
+
+# Create data directory
+RUN mkdir -p /data && chmod 755 /data
+
+# Copy the Rust binary from the rust-builder stage
+COPY --from=rust-builder /app/target/release/litecloud /app/litecloud
+
+# Copy the Flutter web build from the flutter-builder stage
+COPY --from=flutter-builder /app/build/web /app/static
+
+# Expose the port the server listens on
+EXPOSE 8080
+
+# Set environment variables
+ENV RUST_LOG=info
+
+# Run the server
+CMD ["/app/litecloud"]
\ No newline at end of file
diff --git a/api/Cargo.toml b/api/Cargo.toml
new file mode 100644
index 0000000..e4ed1c9
--- /dev/null
+++ b/api/Cargo.toml
@@ -0,0 +1,31 @@
+[package]
+name = "litecloud"
+version = "0.1.0"
+edition = "2021"
+
+[dependencies]
+axum = { version = "0.6", features = ["multipart"] }
+tokio = { version = "1", features = ["full"] }
+tower = "0.4"
+tower-http = { version = "0.4", features = ["fs", "trace", "cors"] }
+sqlx = { version = "0.7", features = ["runtime-tokio", "tls-rustls", "postgres", "uuid", "time", "json"] }
+argon2 = "0.5"
+jsonwebtoken = "8"
+aes-gcm = "0.10"
+rand = "0.8"
+base64 = "0.21"
+uuid = { version = "1", features = ["v4", "serde"] }
+serde = { version = "1", features = ["derive"] }
+serde_json = "1"
+thiserror = "1"
+tracing = "0.1"
+tracing-subscriber = { version = "0.3", features = ["env-filter"] }
+dotenvy = "0.15"
+once_cell = "1"
+time = { version = "0.3", features = ["serde"] }
+validator = { version = "0.16", features = ["derive"] }
+futures = "0.3"
+bytes = "1"
+tokio-util = { version = "0.7", features = ["io"] }
+tokio-stream = "0.1"
+async-trait = "0.1"
\ No newline at end of file
diff --git a/api/migrations/schema.sql b/api/migrations/schema.sql
new file mode 100644
index 0000000..f97ce35
--- /dev/null
+++ b/api/migrations/schema.sql
@@ -0,0 +1,60 @@
+CREATE TABLE users (
+    id UUID PRIMARY KEY DEFAULT gen_random_uuid(),
+    email VARCHAR(255) NOT NULL UNIQUE,
+    username VARCHAR(255) NOT NULL,
+    password_hash VARCHAR(255) NOT NULL,
+    role VARCHAR(50) NOT NULL DEFAULT 'user',
+    storage_used BIGINT NOT NULL DEFAULT 0,
+    storage_quota BIGINT NOT NULL,
+    created_at TIMESTAMPTZ NOT NULL DEFAULT NOW(),
+    updated_at TIMESTAMPTZ NOT NULL DEFAULT NOW()
+);
+
+CREATE TABLE files (
+    id UUID PRIMARY KEY DEFAULT gen_random_uuid(),
+    name VARCHAR(255) NOT NULL,
+    file_type VARCHAR(50) NOT NULL,
+    mime_type VARCHAR(255),
+    size BIGINT NOT NULL DEFAULT 0,
+    owner_id UUID NOT NULL REFERENCES users(id) ON DELETE CASCADE,
+    parent_id UUID REFERENCES files(id) ON DELETE CASCADE,
+    path_depth INT NOT NULL DEFAULT 0,
+    created_at TIMESTAMPTZ NOT NULL DEFAULT NOW(),
+    updated_at TIMESTAMPTZ NOT NULL DEFAULT NOW(),
+    CONSTRAINT valid_path_depth CHECK (path_depth >= 0 AND path_depth <= 20)
+);
+
+CREATE INDEX idx_files_parent_id ON files(parent_id);
+CREATE INDEX idx_files_owner_id ON files(owner_id);
+
+CREATE TABLE permissions (
+    id UUID PRIMARY KEY DEFAULT gen_random_uuid(),
+    name VARCHAR(50) NOT NULL UNIQUE,
+    can_read BOOLEAN NOT NULL DEFAULT TRUE,
+    can_write BOOLEAN NOT NULL DEFAULT FALSE,
+    can_share BOOLEAN NOT NULL DEFAULT FALSE,
+    created_at TIMESTAMPTZ NOT NULL DEFAULT NOW(),
+    updated_at TIMESTAMPTZ NOT NULL DEFAULT NOW()
+);
+
+CREATE TABLE shares (
+    id UUID PRIMARY KEY DEFAULT gen_random_uuid(),
+    file_id UUID NOT NULL REFERENCES files(id) ON DELETE CASCADE,
+    owner_id UUID NOT NULL REFERENCES users(id) ON DELETE CASCADE,
+    recipient_id UUID REFERENCES users(id) ON DELETE CASCADE,
+    permission_id UUID NOT NULL REFERENCES permissions(id),
+    access_key VARCHAR(255) NOT NULL UNIQUE,
+    expires_at TIMESTAMPTZ,
+    created_at TIMESTAMPTZ NOT NULL DEFAULT NOW(),
+    updated_at TIMESTAMPTZ NOT NULL DEFAULT NOW()
+);
+
+CREATE INDEX idx_shares_file_id ON shares(file_id);
+CREATE INDEX idx_shares_owner_id ON shares(owner_id);
+CREATE INDEX idx_shares_recipient_id ON shares(recipient_id);
+CREATE INDEX idx_shares_access_key ON shares(access_key);
+
+INSERT INTO permissions (name, can_read, can_write, can_share) VALUES
+('viewer', TRUE, FALSE, FALSE),
+('editor', TRUE, TRUE, FALSE),
+('owner', TRUE, TRUE, TRUE);
\ No newline at end of file
diff --git a/api/src/config.rs b/api/src/config.rs
new file mode 100644
index 0000000..5f9e4ec
--- /dev/null
+++ b/api/src/config.rs
@@ -0,0 +1,51 @@
+use std::path::PathBuf;
+
+pub struct Config {
+    pub database_url: String,
+    pub jwt_secret: String,
+    pub jwt_expiration: i64,
+    pub master_key: String,
+    pub storage_path: String,
+    pub default_user_quota: i64,
+}
+
+impl Config {
+    pub fn from_env() -> Self {
+        let database_url = std::env::var("DATABASE_URL")
+            .expect("DATABASE_URL must be set");
+
+        let jwt_secret = std::env::var("JWT_SECRET")
+            .expect("JWT_SECRET must be set");
+
+        let jwt_expiration = std::env::var("JWT_EXPIRATION")
+            .unwrap_or_else(|_| "86400".to_string()) // Default to 24 hours
+            .parse::<i64>()
+            .expect("JWT_EXPIRATION must be a valid number");
+
+        let master_key = std::env::var("MASTER_KEY")
+            .expect("MASTER_KEY must be set");
+
+        let storage_path = std::env::var("STORAGE_PATH")
+            .unwrap_or_else(|_| "./storage".to_string());
+
+        let default_user_quota = std::env::var("DEFAULT_USER_QUOTA")
+            .unwrap_or_else(|_| "5368709120".to_string()) // Default to 5GB
+            .parse::<i64>()
+            .expect("DEFAULT_USER_QUOTA must be a valid number");
+
+        Self {
+            database_url,
+            jwt_secret,
+            jwt_expiration,
+            master_key,
+            storage_path,
+            default_user_quota,
+        }
+    }
+
+    pub fn get_user_storage_path(&self, user_id: &str) -> PathBuf {
+        let mut path = PathBuf::from(&self.storage_path);
+        path.push(user_id);
+        path
+    }
+}
\ No newline at end of file
diff --git a/api/src/error.rs b/api/src/error.rs
new file mode 100644
index 0000000..52e9387
--- /dev/null
+++ b/api/src/error.rs
@@ -0,0 +1,119 @@
+use axum::{
+    http::StatusCode,
+    response::{IntoResponse, Response},
+    Json,
+};
+use serde_json::json;
+use thiserror::Error;
+
+#[derive(Error, Debug)]
+pub enum AppError {
+    #[error("Authentication required")]
+    Unauthorized,
+
+    #[error("Access denied")]
+    AccessDenied,
+
+    #[error("User not found")]
+    UserNotFound,
+
+    #[error("User already exists")]
+    UserAlreadyExists,
+
+    #[error("Invalid credentials")]
+    InvalidCredentials,
+
+    #[error("Invalid or expired token")]
+    InvalidToken,
+
+    #[error("File not found")]
+    FileNotFound,
+
+    #[error("File already exists")]
+    FileAlreadyExists,
+
+    #[error("Directory already exists")]
+    DirectoryAlreadyExists,
+
+    #[error("Not a directory")]
+    NotADirectory,
+
+    #[error("Storage quota exceeded")]
+    StorageQuotaExceeded,
+
+    #[error("Path too deep")]
+    PathTooDeep,
+
+    #[error("Database error: {0}")]
+    DatabaseError(#[from] sqlx::Error),
+
+    #[error("Password hashing error: {0}")]
+    PasswordHashingError(#[from] argon2::password_hash::Error),
+
+    #[error("JWT error: {0}")]
+    JwtError(#[from] jsonwebtoken::errors::Error),
+
+    #[error("Encryption error: {0}")]
+    EncryptionError(String),
+
+    #[error("IO error: {0}")]
+    IoError(#[from] std::io::Error),
+
+    #[error("Invalid input: {0}")]
+    ValidationError(String),
+
+    #[error("Internal server error")]
+    InternalServerError,
+}
+
+impl IntoResponse for AppError {
+    fn into_response(self) -> Response {
+        let (status, error_message) = match self {
+            Self::Unauthorized => (StatusCode::UNAUTHORIZED, self.to_string()),
+            Self::AccessDenied => (StatusCode::FORBIDDEN, self.to_string()),
+            Self::UserNotFound | Self::FileNotFound => (StatusCode::NOT_FOUND, self.to_string()),
+            Self::UserAlreadyExists | Self::FileAlreadyExists | Self::DirectoryAlreadyExists => {
+                (StatusCode::CONFLICT, self.to_string())
+            }
+            Self::InvalidCredentials | Self::InvalidToken => {
+                (StatusCode::UNAUTHORIZED, self.to_string())
+            }
+            Self::NotADirectory | Self::ValidationError(_) => {
+                (StatusCode::BAD_REQUEST, self.to_string())
+            }
+            Self::StorageQuotaExceeded => {
+                (StatusCode::PAYLOAD_TOO_LARGE, self.to_string())
+            }
+            Self::PathTooDeep => (StatusCode::BAD_REQUEST, self.to_string()),
+            Self::DatabaseError(e) => {
+                tracing::error!("Database error: {:?}", e);
+                (StatusCode::INTERNAL_SERVER_ERROR, "Internal server error".to_string())
+            }
+            Self::PasswordHashingError(e) => {
+                tracing::error!("Password hashing error: {:?}", e);
+                (StatusCode::INTERNAL_SERVER_ERROR, "Internal server error".to_string())
+            }
+            Self::JwtError(e) => {
+                tracing::error!("JWT error: {:?}", e);
+                (StatusCode::INTERNAL_SERVER_ERROR, "Internal server error".to_string())
+            }
+            Self::EncryptionError(e) => {
+                tracing::error!("Encryption error: {}", e);
+                (StatusCode::INTERNAL_SERVER_ERROR, "Internal server error".to_string())
+            }
+            Self::IoError(e) => {
+                tracing::error!("IO error: {:?}", e);
+                (StatusCode::INTERNAL_SERVER_ERROR, "Internal server error".to_string())
+            }
+            Self::InternalServerError => {
+                (StatusCode::INTERNAL_SERVER_ERROR, "Internal server error".to_string())
+            }
+        };
+
+        let body = Json(json!({
+            "error": error_message
+        }));
+
+        (status, body).into_response()
+    }
+}
\ No newline at end of file
diff --git a/api/src/main.rs b/api/src/main.rs
new file mode 100644
index 0000000..4f9ffb6
--- /dev/null
+++ b/api/src/main.rs
@@ -0,0 +1,94 @@
+use axum::{
+    error_handling::HandleErrorLayer,
+    extract::Extension,
+    http::{HeaderValue, Method, StatusCode},
+    routing::get,
+    Router,
+};
+use dotenvy::dotenv;
+use sqlx::postgres::PgPoolOptions;
+use std::{env, net::SocketAddr, path::PathBuf, sync::Arc, time::Duration};
+use tower::ServiceBuilder;
+use tower_http::{cors::CorsLayer, services::ServeDir, trace::TraceLayer};
+use tracing_subscriber::{layer::SubscriberExt, util::SubscriberInitExt};
+
+mod config;
+mod error;
+mod models;
+mod routes;
+mod services;
+mod utils;
+
+use config::Config;
+use error::AppError;
+
+#[tokio::main]
+async fn main() -> Result<(), Box<dyn std::error::Error>> {
+    dotenv().ok();
+
+    tracing_subscriber::registry()
+        .with(tracing_subscriber::EnvFilter::new(
+            env::var("RUST_LOG").unwrap_or_else(|_| "info,tower_http=debug".into()),
+        ))
+        .with(tracing_subscriber::fmt::layer())
+        .init();
+
+    let config = Config::from_env();
+    let config = Arc::new(config);
+
+    let storage_path = PathBuf::from(&config.storage_path);
+    if !storage_path.exists() {
+        std::fs::create_dir_all(&storage_path)?;
+    }
+
+    let pool = PgPoolOptions::new()
+        .max_connections(10)
+        .connect(&config.database_url)
+        .await?
+
+    sqlx::migrate!("./migrations")
+        .run(&pool)
+        .await?
+
+    tracing::info!("Database migrations applied successfully");
+
+    let encryption_service = services::encryption::EncryptionService::new(&config.master_key);
+
+    let cors = CorsLayer::new()
+        .allow_origin("*".parse::<HeaderValue>().unwrap())
+        .allow_methods([Method::GET, Method::POST, Method::PUT, Method::DELETE])
+        .allow_headers([axum::http::header::CONTENT_TYPE, axum::http::header::AUTHORIZATION]);
+
+    let api_router = Router::new()
+        .nest("/api", routes::api_routes())
+        .layer(
+            ServiceBuilder::new()
+                .layer(HandleErrorLayer::new(|error| async move {
+                    (
+                        StatusCode::INTERNAL_SERVER_ERROR,
+                        format!("Unhandled error: {}", error),
+                    )
+                }))
+                .layer(TraceLayer::new_for_http())
+                .layer(Extension(pool.clone()))
+                .layer(Extension(Arc::clone(&config)))
+                .layer(Extension(encryption_service)),
+        );
+
+    let static_files_service = ServeDir::new("static");
+    let static_router = Router::new().nest_service("/", static_files_service.clone());
+
+    let app = Router::new()
+        .merge(api_router)
+        .fallback_service(static_router)
+        .layer(cors);
+
+    let addr = SocketAddr::from(([0, 0, 0, 0], 8080));
+    tracing::info!("Listening on {}", addr);
+
+    axum::Server::bind(&addr)
+        .serve(app.into_make_service())
+        .await?
+
+    Ok(())
+}
\ No newline at end of file
diff --git a/api/src/models/file.rs b/api/src/models/file.rs
new file mode 100644
index 0000000..7d66d87
--- /dev/null
+++ b/api/src/models/file.rs
@@ -0,0 +1,264 @@
+use serde::{Deserialize, Serialize};
+use sqlx::{postgres::PgPool, FromRow};
+use time::OffsetDateTime;
+use uuid::Uuid;
+
+use crate::error::AppError;
+
+#[derive(Debug, Serialize, Deserialize, FromRow, Clone, PartialEq)]
+#[serde(rename_all = "snake_case")]
+pub enum FileType {
+    File,
+    Directory,
+}
+
+#[derive(Debug, Serialize, Deserialize, FromRow)]
+pub struct File {
+    pub id: Uuid,
+    pub name: String,
+    pub file_type: FileType,
+    pub mime_type: Option<String>,
+    pub size: i64,
+    pub owner_id: Uuid,
+    pub parent_id: Option<Uuid>,
+    pub encryption_key: Option<String>, // Encrypted with master key
+    pub encryption_iv: Option<String>,  // Initialization vector for AES-GCM
+    pub created_at: OffsetDateTime,
+    pub updated_at: OffsetDateTime,
+}
+
+#[derive(Debug, Deserialize)]
+pub struct CreateFileDto {
+    pub name: String,
+    pub file_type: FileType,
+    pub mime_type: Option<String>,
+    pub size: i64,
+    pub parent_id: Option<Uuid>,
+}
+
+#[derive(Debug, Deserialize)]
+pub struct CreateDirectoryDto {
+    pub name: String,
+    pub parent_id: Option<Uuid>,
+}
+
+impl File {
+    pub async fn create_file(
+        pool: &PgPool,
+        dto: CreateFileDto,
+        owner_id: Uuid,
+        encryption_key: Option<String>,
+        encryption_iv: Option<String>,
+    ) -> Result<Self, AppError> {
+        // Validate parent directory if provided
+        if let Some(parent_id) = dto.parent_id {
+            let parent = Self::find_by_id(pool, parent_id).await?;
+            if parent.file_type != FileType::Directory {
+                return Err(AppError::NotADirectory);
+            }
+            // Check if user has access to parent directory
+            if parent.owner_id != owner_id {
+                // TODO: Check if user has write permission through sharing
+                return Err(AppError::AccessDenied);
+            }
+        }
+
+        // Check for duplicate filename in the same directory
+        let existing_file = sqlx::query!("SELECT id FROM files WHERE name = $1 AND parent_id IS NOT DISTINCT FROM $2 AND owner_id = $3",
+            dto.name, dto.parent_id, owner_id)
+            .fetch_optional(pool)
+            .await?;
+
+        if existing_file.is_some() {
+            return Err(AppError::FileAlreadyExists);
+        }
+
+        // Create the file record
+        let file = sqlx::query_as!(File,
+            r#"INSERT INTO files (id, name, file_type, mime_type, size, owner_id, parent_id, encryption_key, encryption_iv, created_at, updated_at)
+            VALUES ($1, $2, $3, $4, $5, $6, $7, $8, $9, $10, $11)
+            RETURNING id, name, file_type as "file_type: FileType", mime_type, size, owner_id, parent_id, encryption_key, encryption_iv, created_at, updated_at"#,
+            Uuid::new_v4(),
+            dto.name,
+            dto.file_type as FileType,
+            dto.mime_type,
+            dto.size,
+            owner_id,
+            dto.parent_id,
+            encryption_key,
+            encryption_iv,
+            OffsetDateTime::now_utc(),
+            OffsetDateTime::now_utc()
+        )
+        .fetch_one(pool)
+        .await?;
+
+        Ok(file)
+    }
+
+    pub async fn create_directory(
+        pool: &PgPool,
+        dto: CreateDirectoryDto,
+        owner_id: Uuid,
+    ) -> Result<Self, AppError> {
+        // Validate parent directory if provided
+        if let Some(parent_id) = dto.parent_id {
+            let parent = Self::find_by_id(pool, parent_id).await?;
+            if parent.file_type != FileType::Directory {
+                return Err(AppError::NotADirectory);
+            }
+            // Check if user has access to parent directory
+            if parent.owner_id != owner_id {
+                // TODO: Check if user has write permission through sharing
+                return Err(AppError::AccessDenied);
+            }
+        }
+
+        // Check for duplicate directory name in the same parent
+        let existing_dir = sqlx::query!("SELECT id FROM files WHERE name = $1 AND parent_id IS NOT DISTINCT FROM $2 AND owner_id = $3 AND file_type = 'directory'",
+            dto.name, dto.parent_id, owner_id)
+            .fetch_optional(pool)
+            .await?;
+
+        if existing_dir.is_some() {
+            return Err(AppError::DirectoryAlreadyExists);
+        }
+
+        // Create the directory record
+        let directory = sqlx::query_as!(File,
+            r#"INSERT INTO files (id, name, file_type, mime_type, size, owner_id, parent_id, encryption_key, encryption_iv, created_at, updated_at)
+            VALUES ($1, $2, $3, $4, $5, $6, $7, $8, $9, $10, $11)
+            RETURNING id, name, file_type as "file_type: FileType", mime_type, size, owner_id, parent_id, encryption_key, encryption_iv, created_at, updated_at"#,
+            Uuid::new_v4(),
+            dto.name,
+            FileType::Directory,
+            None as Option<String>,
+            0i64,
+            owner_id,
+            dto.parent_id,
+            None as Option<String>,
+            None as Option<String>,
+            OffsetDateTime::now_utc(),
+            OffsetDateTime::now_utc()
+        )
+        .fetch_one(pool)
+        .await?;
+
+        Ok(directory)
+    }
+
+    pub async fn find_by_id(pool: &PgPool, id: Uuid) -> Result<Self, AppError> {
+        let file = sqlx::query_as!(File,
+            r#"SELECT id, name, file_type as "file_type: FileType", mime_type, size, owner_id, parent_id, encryption_key, encryption_iv, created_at, updated_at
+            FROM files WHERE id = $1"#,
+            id
+        )
+        .fetch_optional(pool)
+        .await?
+        .ok_or(AppError::FileNotFound)?;
+
+        Ok(file)
+    }
+
+    pub async fn list_directory(
+        pool: &PgPool,
+        directory_id: Option<Uuid>,
+        user_id: Uuid,
+    ) -> Result<Vec<Self>, AppError> {
+        // If directory_id is None, list files at root level for the user
+        let files = if let Some(dir_id) = directory_id {
+            // Verify directory exists and user has access
+            let directory = Self::find_by_id(pool, dir_id).await?;
+            if directory.file_type != FileType::Directory {
+                return Err(AppError::NotADirectory);
+            }
+            
+            // Check if user has access to this directory
+            if directory.owner_id != user_id {
+                // TODO: Check if user has read permission through sharing
+                return Err(AppError::AccessDenied);
+            }
+            
+            sqlx::query_as!(File,
+                r#"SELECT id, name, file_type as "file_type: FileType", mime_type, size, owner_id, parent_id, encryption_key, encryption_iv, created_at, updated_at
+                FROM files WHERE parent_id = $1 ORDER BY file_type, name"#,
+                dir_id
+            )
+            .fetch_all(pool)
+            .await?
+        } else {
+            // List root level files for the user
+            sqlx::query_as!(File,
+                r#"SELECT id, name, file_type as "file_type: FileType", mime_type, size, owner_id, parent_id, encryption_key, encryption_iv, created_at, updated_at
+                FROM files WHERE parent_id IS NULL AND owner_id = $1 ORDER BY file_type, name"#,
+                user_id
+            )
+            .fetch_all(pool)
+            .await?
+        };
+
+        Ok(files)
+    }
+
+    pub async fn delete(
+        pool: &PgPool,
+        id: Uuid,
+        user_id: Uuid,
+    ) -> Result<(), AppError> {
+        // Find the file/directory
+        let file = Self::find_by_id(pool, id).await?;
+        
+        // Check if user has permission to delete
+        if file.owner_id != user_id {
+            // TODO: Check if user has write permission through sharing
+            return Err(AppError::AccessDenied);
+        }
+        
+        // If it's a directory, recursively delete all contents
+        if file.file_type == FileType::Directory {
+            // Get all files in this directory
+            let files_in_dir = Self::list_directory(pool, Some(id), user_id).await?;
+            
+            // Recursively delete each file/subdirectory
+            for file in files_in_dir {
+                Self::delete(pool, file.id, user_id).await?;
+            }
+        }
+        
+        // Delete the file/directory record
+        sqlx::query!("DELETE FROM files WHERE id = $1", id)
+            .execute(pool)
+            .await?;
+            
+        Ok(())
+    }
+
+    pub async fn get_file_path(pool: &PgPool, id: Uuid) -> Result<String, AppError> {
+        let file = Self::find_by_id(pool, id).await?;
+        
+        // Build the path by traversing parent directories
+        let mut path_parts = vec![file.name.clone()];
+        let mut current_parent_id = file.parent_id;
+        
+        // Prevent infinite loops by limiting depth
+        let mut depth = 0;
+        const MAX_DEPTH: usize = 100;
+        
+        while let Some(parent_id) = current_parent_id {
+            if depth >= MAX_DEPTH {
+                return Err(AppError::PathTooDeep);
+            }
+            
+            let parent = Self::find_by_id(pool, parent_id).await?;
+            path_parts.push(parent.name.clone());
+            current_parent_id = parent.parent_id;
+            depth += 1;
+        }
+        
+        // Reverse to get the correct order (root -> leaf)
+        path_parts.reverse();
+        
+        // Join with path separator
+        Ok(path_parts.join("/"))
+    }
+}
\ No newline at end of file
diff --git a/api/src/models/mod.rs b/api/src/models/mod.rs
new file mode 100644
index 0000000..4e124e2
--- /dev/null
+++ b/api/src/models/mod.rs
@@ -0,0 +1,9 @@
+pub mod user;
+pub mod file;
+pub mod share;
+pub mod permission;
+
+pub use user::User;
+pub use file::{File, FileType};
+pub use share::{Share, ShareType};
+pub use permission::{Permission, Role};
\ No newline at end of file
diff --git a/api/src/models/permission.rs b/api/src/models/permission.rs
new file mode 100644
index 0000000..e1f574d
--- /dev/null
+++ b/api/src/models/permission.rs
@@ -0,0 +1,93 @@
+use crate::error::AppError;
+use serde::{Deserialize, Serialize};
+use sqlx::PgPool;
+use time::OffsetDateTime;
+use uuid::Uuid;
+
+#[derive(Debug, Serialize, Deserialize, sqlx::FromRow)]
+pub struct Permission {
+    pub id: Uuid,
+    pub name: String,
+    pub can_read: bool,
+    pub can_write: bool,
+    pub can_share: bool,
+    pub created_at: OffsetDateTime,
+    pub updated_at: OffsetDateTime,
+}
+
+impl Permission {
+    pub async fn find_by_id(pool: &PgPool, id: Uuid) -> Result<Permission, AppError> {
+        let permission = sqlx::query_as::<_, Permission>(
+            r#"
+            SELECT * FROM permissions WHERE id = $1
+            "#,
+        )
+        .bind(id)
+        .fetch_optional(pool)
+        .await
+        .map_err(AppError::from)?;
+
+        permission.ok_or_else(|| AppError::NotFound("Permission not found".to_string()))
+    }
+
+    pub async fn find_by_name(pool: &PgPool, name: &str) -> Result<Permission, AppError> {
+        let permission = sqlx::query_as::<_, Permission>(
+            r#"
+            SELECT * FROM permissions WHERE name = $1
+            "#,
+        )
+        .bind(name)
+        .fetch_optional(pool)
+        .await
+        .map_err(AppError::from)?;
+
+        permission.ok_or_else(|| AppError::NotFound(format!("Permission '{}' not found", name)))
+    }
+
+    pub async fn list_all(pool: &PgPool) -> Result<Vec<Permission>, AppError> {
+        let permissions = sqlx::query_as::<_, Permission>(
+            r#"
+            SELECT * FROM permissions
+            "#,
+        )
+        .fetch_all(pool)
+        .await
+        .map_err(AppError::from)?;
+
+        Ok(permissions)
+    }
+
+    pub async fn create_default_permissions(pool: &PgPool) -> Result<(), AppError> {
+        // Check if permissions already exist
+        let existing = Self::list_all(pool).await?;
+        if !existing.is_empty() {
+            return Ok(());
+        }
+
+        // Create default permission levels
+        let permissions = [
+            ("viewer", true, false, false),
+            ("editor", true, true, false),
+            ("admin", true, true, true),
+        ];
+
+        for (name, can_read, can_write, can_share) in permissions {
+            sqlx::query(
+                r#"
+                INSERT INTO permissions (name, can_read, can_write, can_share)
+                VALUES ($1, $2, $3, $4)
+                ON CONFLICT (name) DO NOTHING
+                "#,
+            )
+            .bind(name)
+            .bind(can_read)
+            .bind(can_write)
+            .bind(can_share)
+            .execute(pool)
+            .await
+            .map_err(AppError::from)?;
+        }
+
+        Ok(())
+    }
+}
\ No newline at end of file
diff --git a/api/src/models/share.rs b/api/src/models/share.rs
new file mode 100644
index 0000000..260b1e7
--- /dev/null
+++ b/api/src/models/share.rs
@@ -0,0 +1,202 @@
+use crate::error::AppError;
+use crate::models::file::File;
+use crate::models::permission::Permission;
+use crate::models::user::User;
+use serde::{Deserialize, Serialize};
+use sqlx::PgPool;
+use time::OffsetDateTime;
+use uuid::Uuid;
+
+#[derive(Debug, Serialize, Deserialize, sqlx::FromRow)]
+pub struct Share {
+    pub id: Uuid,
+    pub file_id: Uuid,
+    pub owner_id: Uuid,
+    pub recipient_id: Option<Uuid>,
+    pub permission_id: Uuid,
+    pub access_key: String,
+    pub expires_at: Option<OffsetDateTime>,
+    pub created_at: OffsetDateTime,
+    pub updated_at: OffsetDateTime,
+}
+
+#[derive(Debug, Serialize, Deserialize)]
+pub struct CreateShareDto {
+    pub file_id: Uuid,
+    pub recipient_id: Option<Uuid>,
+    pub permission_id: Uuid,
+    pub expires_at: Option<OffsetDateTime>,
+}
+
+#[derive(Debug, Serialize, Deserialize)]
+pub struct ShareResponse {
+    pub id: Uuid,
+    pub file: File,
+    pub owner: User,
+    pub recipient: Option<User>,
+    pub permission: Permission,
+    pub access_key: String,
+    pub expires_at: Option<OffsetDateTime>,
+    pub created_at: OffsetDateTime,
+    pub updated_at: OffsetDateTime,
+}
+
+impl Share {
+    pub async fn create(
+        pool: &PgPool,
+        owner_id: Uuid,
+        dto: CreateShareDto,
+    ) -> Result<Share, AppError> {
+        // Verify file exists and user has access to it, then create a random key for it
+        let file = File::find_by_id(pool, dto.file_id).await?
+        
+        if file.owner_id != owner_id {
+            return Err(AppError::AccessDenied("You can only share files you own".to_string()));
+        }
+        let access_key = Uuid::new_v4().to_string();
+
+        let share = sqlx::query_as::<_, Share>(
+            r#"
+            INSERT INTO shares (file_id, owner_id, recipient_id, permission_id, access_key, expires_at)
+            VALUES ($1, $2, $3, $4, $5, $6)
+            RETURNING *
+            "#,
+        )
+        .bind(dto.file_id)
+        .bind(owner_id)
+        .bind(dto.recipient_id)
+        .bind(dto.permission_id)
+        .bind(&access_key)
+        .bind(dto.expires_at)
+        .fetch_one(pool)
+        .await
+        .map_err(AppError::from)?;
+
+        Ok(share)
+    }
+
+    pub async fn find_by_id(pool: &PgPool, id: Uuid) -> Result<Share, AppError> {
+        let share = sqlx::query_as::<_, Share>(
+            r#"
+            SELECT * FROM shares WHERE id = $1
+            "#,
+        )
+        .bind(id)
+        .fetch_optional(pool)
+        .await
+        .map_err(AppError::from)?;
+
+        share.ok_or_else(|| AppError::NotFound("Share not found".to_string()))
+    }
+
+    pub async fn find_by_access_key(pool: &PgPool, access_key: &str) -> Result<Share, AppError> {
+        let share = sqlx::query_as::<_, Share>(
+            r#"
+            SELECT * FROM shares WHERE access_key = $1
+            "#,
+        )
+        .bind(access_key)
+        .fetch_optional(pool)
+        .await
+        .map_err(AppError::from)?;
+
+        share.ok_or_else(|| AppError::NotFound("Share not found".to_string()))
+    }
+
+    pub async fn list_by_owner(pool: &PgPool, owner_id: Uuid) -> Result<Vec<Share>, AppError> {
+        let shares = sqlx::query_as::<_, Share>(
+            r#"
+            SELECT * FROM shares WHERE owner_id = $1
+            "#,
+        )
+        .bind(owner_id)
+        .fetch_all(pool)
+        .await
+        .map_err(AppError::from)?;
+
+        Ok(shares)
+    }
+
+    pub async fn list_by_recipient(pool: &PgPool, recipient_id: Uuid) -> Result<Vec<Share>, AppError> {
+        let shares = sqlx::query_as::<_, Share>(
+            r#"
+            SELECT * FROM shares WHERE recipient_id = $1
+            "#,
+        )
+        .bind(recipient_id)
+        .fetch_all(pool)
+        .await
+        .map_err(AppError::from)?;
+
+        Ok(shares)
+    }
+
+    pub async fn delete(pool: &PgPool, id: Uuid, user_id: Uuid) -> Result<(), AppError> {
+        let share = Self::find_by_id(pool, id).await?
+
+        if share.owner_id != user_id {
+            return Err(AppError::AccessDenied("You can only delete shares you own".to_string()));
+        }
+
+        sqlx::query(
+            r#"
+            DELETE FROM shares WHERE id = $1
+            "#,
+        )
+        .bind(id)
+        .execute(pool)
+        .await
+        .map_err(AppError::from)?;
+
+        Ok(())
+    }
+
+    pub async fn get_full_share_details(pool: &PgPool, id: Uuid) -> Result<ShareResponse, AppError> {
+        let share = Self::find_by_id(pool, id).await?
+
+        let file = File::find_by_id(pool, share.file_id).await?
+        let owner = User::find_by_id(pool, share.owner_id).await?
+        
+        let recipient = match share.recipient_id {
+            Some(recipient_id) => Some(User::find_by_id(pool, recipient_id).await?),
+            None => None,
+        };
+
+        let permission = Permission::find_by_id(pool, share.permission_id).await?
+
+        Ok(ShareResponse {
+            id: share.id,
+            file,
+            owner,
+            recipient,
+            permission,
+            access_key: share.access_key,
+            expires_at: share.expires_at,
+            created_at: share.created_at,
+            updated_at: share.updated_at,
+        })
+    }
+
+    pub async fn is_valid_share(
+        pool: &PgPool,
+        share_id: Uuid,
+        user_id: Option<Uuid>,
+    ) -> Result<bool, AppError> {
+        let share = Self::find_by_id(pool, share_id).await?
+
+        if let Some(expires_at) = share.expires_at {
+            if expires_at < OffsetDateTime::now_utc() {
+                return Ok(false);
+            }
+        }
+
+        // If share has a specific recipient, check if the user is that recipient - otherwise return a valid share for everyone with the link
+        if let Some(recipient_id) = share.recipient_id {
+            if let Some(user_id) = user_id {
+                return Ok(recipient_id == user_id);
+            }
+            return Ok(false);
+        }
+        Ok(true)
+    }
+}
\ No newline at end of file
diff --git a/api/src/models/user.rs b/api/src/models/user.rs
new file mode 100644
index 0000000..94beeff
--- /dev/null
+++ b/api/src/models/user.rs
@@ -0,0 +1,137 @@
+use argon2::{password_hash::SaltString, Argon2, PasswordHash, PasswordHasher, PasswordVerifier};
+use rand::rngs::OsRng;
+use serde::{Deserialize, Serialize};
+use sqlx::{postgres::PgPool, FromRow};
+use time::OffsetDateTime;
+use uuid::Uuid;
+
+use crate::error::AppError;
+
+#[derive(Debug, Serialize, Deserialize, FromRow)]
+pub struct User {
+    pub id: Uuid,
+    pub email: String,
+    #[serde(skip_serializing)]
+    pub password_hash: String,
+    pub display_name: Option<String>,
+    pub storage_used: i64,
+    pub storage_quota: i64,
+    pub created_at: OffsetDateTime,
+    pub updated_at: OffsetDateTime,
+}
+
+#[derive(Debug, Deserialize)]
+pub struct CreateUserDto {
+    pub email: String,
+    pub password: String,
+    pub display_name: Option<String>,
+}
+
+#[derive(Debug, Deserialize)]
+pub struct LoginUserDto {
+    pub email: String,
+    pub password: String,
+}
+
+impl User {
+    pub async fn create(pool: &PgPool, dto: CreateUserDto) -> Result<Self, AppError> {
+        let existing_user = sqlx::query!("SELECT id FROM users WHERE email = $1", dto.email)
+            .fetch_optional(pool)
+            .await?;
+
+        if existing_user.is_some() {
+            return Err(AppError::UserAlreadyExists);
+        }
+        let password_hash = Self::hash_password(&dto.password)?;
+        
+        let storage_quota = 1_073_741_824;
+
+        let user = sqlx::query_as!(User,
+            r#"INSERT INTO users (id, email, password_hash, display_name, storage_used, storage_quota, created_at, updated_at)
+            VALUES ($1, $2, $3, $4, $5, $6, $7, $8)
+            RETURNING id, email, password_hash, display_name, storage_used, storage_quota, created_at, updated_at"#,
+            Uuid::new_v4(),
+            dto.email,
+            password_hash,
+            dto.display_name,
+            0i64,
+            storage_quota,
+            OffsetDateTime::now_utc(),
+            OffsetDateTime::now_utc()
+        )
+        .fetch_one(pool)
+        .await?;
+
+        Ok(user)
+    }
+
+    pub async fn find_by_id(pool: &PgPool, id: Uuid) -> Result<Self, AppError> {
+        let user = sqlx::query_as!(User,
+            r#"SELECT id, email, password_hash, display_name, storage_used, storage_quota, created_at, updated_at
+            FROM users WHERE id = $1"#,
+            id
+        )
+        .fetch_optional(pool)
+        .await?
+        .ok_or(AppError::UserNotFound)?;
+
+        Ok(user)
+    }
+
+    pub async fn find_by_email(pool: &PgPool, email: &str) -> Result<Self, AppError> {
+        let user = sqlx::query_as!(User,
+            r#"SELECT id, email, password_hash, display_name, storage_used, storage_quota, created_at, updated_at
+            FROM users WHERE email = $1"#,
+            email
+        )
+        .fetch_optional(pool)
+        .await?
+        .ok_or(AppError::UserNotFound)?;
+
+        Ok(user)
+    }
+
+    pub async fn authenticate(pool: &PgPool, dto: LoginUserDto) -> Result<Self, AppError> {
+        let user = Self::find_by_email(pool, &dto.email).await?;
+
+        if !Self::verify_password(&dto.password, &user.password_hash)? {
+            return Err(AppError::InvalidCredentials);
+        }
+
+        Ok(user)
+    }
+
+    pub async fn update_storage_used(pool: &PgPool, user_id: Uuid, bytes_added: i64) -> Result<(), AppError> {
+        let mut user = Self::find_by_id(pool, user_id).await?;
+        
+        let new_storage_used = user.storage_used + bytes_added;
+        
+        if new_storage_used > user.storage_quota {
+            return Err(AppError::StorageQuotaExceeded);
+        }
+        sqlx::query!("UPDATE users SET storage_used = $1, updated_at = $2 WHERE id = $3",
+            new_storage_used,
+            OffsetDateTime::now_utc(),
+            user_id
+        )
+        .execute(pool)
+        .await?;
+        
+        Ok(())
+    }
+
+    fn hash_password(password: &str) -> Result<String, AppError> {
+        let salt = SaltString::generate(&mut OsRng);
+        let argon2 = Argon2::default();
+        let password_hash = argon2
+            .hash_password(password.as_bytes(), &salt)?
+            .to_string();
+        Ok(password_hash)
+    }
+
+    fn verify_password(password: &str, hash: &str) -> Result<bool, AppError> {
+        let parsed_hash = PasswordHash::new(hash)?;
+        let argon2 = Argon2::default();
+        Ok(argon2.verify_password(password.as_bytes(), &parsed_hash).is_ok())
+    }
+}
\ No newline at end of file
diff --git a/api/src/routes/auth.rs b/api/src/routes/auth.rs
new file mode 100644
index 0000000..d61eac7
--- /dev/null
+++ b/api/src/routes/auth.rs
@@ -0,0 +1,58 @@
+use axum::{
+    extract::Extension,
+    routing::post,
+    Json, Router,
+};
+use sqlx::PgPool;
+use std::sync::Arc;
+
+use crate::config::Config;
+use crate::error::AppError;
+use crate::models::user::{CreateUserDto, LoginUserDto, User};
+use crate::utils::jwt;
+
+pub fn routes() -> Router {
+    Router::new()
+        .route("/auth/register", post(register))
+        .route("/auth/login", post(login))
+}
+
+async fn register(
+    Extension(pool): Extension<PgPool>,
+    Extension(config): Extension<Arc<Config>>,
+    Json(create_user_dto): Json<CreateUserDto>,
+) -> Result<Json<serde_json::Value>, AppError> {
+    let user = User::create(&pool, create_user_dto, &config).await?;
+
+    let token = jwt::generate_token(
+        &config,
+        user.id,
+        &user.email,
+        &user.role,
+    )?;
+
+    Ok(Json(serde_json::json!({
+        "user": user,
+        "token": token
+    })))
+}
+
+async fn login(
+    Extension(pool): Extension<PgPool>,
+    Extension(config): Extension<Arc<Config>>,
+    Json(login_dto): Json<LoginUserDto>,
+) -> Result<Json<serde_json::Value>, AppError> {
+    let user = User::authenticate(&pool, &login_dto.email, &login_dto.password).await?;
+
+    let token = jwt::generate_token(
+        &config,
+        user.id,
+        &user.email,
+        &user.role,
+    )?;
+
+    Ok(Json(serde_json::json!({
+        "user": user,
+        "token": token
+    })))
+}
\ No newline at end of file
diff --git a/api/src/routes/files.rs b/api/src/routes/files.rs
new file mode 100644
index 0000000..7ce698a
--- /dev/null
+++ b/api/src/routes/files.rs
@@ -0,0 +1,205 @@
+use axum::{
+    body::StreamBody,
+    extract::{Extension, Multipart, Path},
+    http::{HeaderMap, StatusCode},
+    response::IntoResponse,
+    routing::{delete, get, post},
+    Json, Router,
+};
+use sqlx::PgPool;
+use std::{path::PathBuf, sync::Arc};
+use tokio::fs::File;
+use tokio_util::io::ReaderStream;
+use uuid::Uuid;
+
+use crate::config::Config;
+use crate::error::AppError;
+use crate::models::file::{CreateDirectoryDto, CreateFileDto, File as FileModel, FileType};
+use crate::services::auth::AuthUser;
+use crate::services::encryption::EncryptionService;
+use crate::services::storage::StorageService;
+
+pub fn routes() -> Router {
+    Router::new()
+        .route("/files", get(list_files))
+        .route("/files/:id", get(get_file))
+        .route("/files/:id/download", get(download_file))
+        .route("/files/upload", post(upload_file))
+        .route("/files/directory", post(create_directory))
+        .route("/files/:id", delete(delete_file))
+}
+
+async fn list_files(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Path(parent_id): Option<Path<Uuid>>,
+) -> Result<Json<Vec<FileModel>>, AppError> {
+    let files = match parent_id {
+        Some(parent_id) => FileModel::list_by_parent(&pool, parent_id, auth_user.id).await?,
+        None => FileModel::list_root_directory(&pool, auth_user.id).await?,
+    };
+
+    Ok(Json(files))
+}
+
+async fn get_file(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Path(id): Path<Uuid>,
+) -> Result<Json<FileModel>, AppError> {
+    let file = FileModel::find_by_id(&pool, id).await?;
+
+    // Check if user has access to this file
+    if file.owner_id != auth_user.id {
+        return Err(AppError::AccessDenied("You don't have access to this file".to_string()));
+    }
+
+    Ok(Json(file))
+}
+
+async fn upload_file(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Extension(config): Extension<Arc<Config>>,
+    Extension(encryption_service): Extension<EncryptionService>,
+    mut multipart: Multipart,
+) -> Result<Json<FileModel>, AppError> {
+    // Extract file data from multipart form
+    let mut file_name = None;
+    let mut file_data = None;
+    let mut parent_id = None;
+
+    while let Some(field) = multipart.next_field().await.map_err(|e| AppError::InvalidInput(e.to_string()))? {
+        let name = field.name().unwrap_or("").to_string();
+
+        if name == "file" {
+            file_name = field.file_name().map(|s| s.to_string());
+            file_data = Some(field.bytes().await.map_err(|e| AppError::InvalidInput(e.to_string()))?);
+        } else if name == "parent_id" {
+            let parent_id_str = field.text().await.map_err(|e| AppError::InvalidInput(e.to_string()))?;
+            if !parent_id_str.is_empty() {
+                parent_id = Some(Uuid::parse_str(&parent_id_str).map_err(|e| AppError::InvalidInput(e.to_string()))?);
+            }
+        }
+    }
+
+    let file_name = file_name.ok_or_else(|| AppError::InvalidInput("File name is required".to_string()))?;
+    let file_data = file_data.ok_or_else(|| AppError::InvalidInput("File data is required".to_string()))?;
+
+    // Check user storage quota
+    let user = crate::models::user::User::find_by_id(&pool, auth_user.id).await?;
+    if user.storage_used + file_data.len() as i64 > user.storage_quota {
+        return Err(AppError::StorageQuotaExceeded("Storage quota exceeded".to_string()));
+    }
+
+    // Create storage service
+    let storage_service = StorageService::new(&config.storage_path);
+
+    // Create file record in database
+    let create_file_dto = CreateFileDto {
+        name: file_name,
+        parent_id,
+        size: file_data.len() as i64,
+        mime_type: mime_guess::from_path(&file_name).first_or_octet_stream().to_string(),
+    };
+
+    let file = FileModel::create(&pool, auth_user.id, create_file_dto).await?;
+
+    // Encrypt and save file to disk
+    let encrypted_data = encryption_service.encrypt(&file_data)?;
+    storage_service.save_file(auth_user.id, file.id, &encrypted_data).await?;
+
+    // Update user storage used
+    crate::models::user::User::update_storage_used(&pool, auth_user.id, file_data.len() as i64).await?;
+
+    Ok(Json(file))
+}
+
+async fn download_file(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Extension(config): Extension<Arc<Config>>,
+    Extension(encryption_service): Extension<EncryptionService>,
+    Path(id): Path<Uuid>,
+) -> Result<impl IntoResponse, AppError> {
+    // Get file metadata
+    let file = FileModel::find_by_id(&pool, id).await?;
+
+    // Check if user has access to this file
+    if file.owner_id != auth_user.id {
+        return Err(AppError::AccessDenied("You don't have access to this file".to_string()));
+    }
+
+    // Check if it's a file (not a directory)
+    if file.file_type != FileType::File {
+        return Err(AppError::InvalidInput("Cannot download a directory".to_string()));
+    }
+
+    // Create storage service
+    let storage_service = StorageService::new(&config.storage_path);
+
+    // Read encrypted file from disk
+    let encrypted_data = storage_service.read_file(auth_user.id, file.id).await?;
+
+    // Decrypt file
+    let decrypted_data = encryption_service.decrypt(&encrypted_data)?;
+
+    // Set up response headers
+    let mut headers = HeaderMap::new();
+    headers.insert(
+        axum::http::header::CONTENT_TYPE,
+        file.mime_type.parse().unwrap_or_else(|_| "application/octet-stream".parse().unwrap()),
+    );
+    headers.insert(
+        axum::http::header::CONTENT_DISPOSITION,
+        format!("attachment; filename=\"{}\"", file.name).parse().unwrap(),
+    );
+
+    // Create a stream from the decrypted data
+    let stream = tokio_util::io::ReaderStream::new(std::io::Cursor::new(decrypted_data));
+    let body = StreamBody::new(stream);
+
+    Ok((StatusCode::OK, headers, body))
+}
+
+async fn create_directory(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Json(create_dir_dto): Json<CreateDirectoryDto>,
+) -> Result<Json<FileModel>, AppError> {
+    let directory = FileModel::create_directory(&pool, auth_user.id, create_dir_dto).await?;
+    Ok(Json(directory))
+}
+
+async fn delete_file(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Extension(config): Extension<Arc<Config>>,
+    Path(id): Path<Uuid>,
+) -> Result<StatusCode, AppError> {
+    // Get file metadata
+    let file = FileModel::find_by_id(&pool, id).await?;
+
+    // Check if user has access to this file
+    if file.owner_id != auth_user.id {
+        return Err(AppError::AccessDenied("You don't have access to this file".to_string()));
+    }
+
+    // Create storage service
+    let storage_service = StorageService::new(&config.storage_path);
+
+    // Delete file or directory
+    if file.file_type == FileType::Directory {
+        // For directories, recursively delete all contents
+        FileModel::delete_directory_recursive(&pool, id, auth_user.id, &storage_service).await?;
+    } else {
+        // For files, delete the file from storage and update user quota
+        storage_service.delete_file(auth_user.id, file.id).await?;
+        FileModel::delete(&pool, id).await?;
+        
+        // Update user storage used
+        crate::models::user::User::update_storage_used(&pool, auth_user.id, -file.size).await?;
+    }
+
+    Ok(StatusCode::NO_CONTENT)
+}
\ No newline at end of file
diff --git a/api/src/routes/mod.rs b/api/src/routes/mod.rs
new file mode 100644
index 0000000..ecaaabe
--- /dev/null
+++ b/api/src/routes/mod.rs
@@ -0,0 +1,14 @@
+mod auth;
+mod files;
+mod shares;
+mod users;
+
+use axum::Router;
+
+pub fn api_routes() -> Router {
+    Router::new()
+        .merge(auth::routes())
+        .merge(files::routes())
+        .merge(shares::routes())
+        .merge(users::routes())
+}
\ No newline at end of file
diff --git a/api/src/routes/shares.rs b/api/src/routes/shares.rs
new file mode 100644
index 0000000..c0305e4
--- /dev/null
+++ b/api/src/routes/shares.rs
@@ -0,0 +1,98 @@
+use axum::{
+    extract::{Extension, Path},
+    http::StatusCode,
+    routing::{delete, get, post},
+    Json, Router,
+};
+use sqlx::PgPool;
+use uuid::Uuid;
+
+use crate::error::AppError;
+use crate::models::share::{CreateShareDto, Share, ShareResponse};
+use crate::services::auth::AuthUser;
+
+pub fn routes() -> Router {
+    Router::new()
+        .route("/shares", get(list_shares))
+        .route("/shares", post(create_share))
+        .route("/shares/:id", get(get_share))
+        .route("/shares/:id", delete(delete_share))
+        .route("/shares/access/:access_key", get(access_shared_file))
+}
+
+async fn list_shares(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+) -> Result<Json<Vec<ShareResponse>>, AppError> {
+    // Get shares owned by the user
+    let owned_shares = Share::list_by_owner(&pool, auth_user.id).await?;
+    
+    // Get shares shared with the user
+    let received_shares = Share::list_by_recipient(&pool, auth_user.id).await?;
+    
+    // Combine and get full details for each share
+    let mut share_responses = Vec::new();
+    
+    for share in owned_shares {
+        let share_response = Share::get_full_share_details(&pool, share.id).await?;
+        share_responses.push(share_response);
+    }
+    
+    for share in received_shares {
+        let share_response = Share::get_full_share_details(&pool, share.id).await?;
+        share_responses.push(share_response);
+    }
+    
+    Ok(Json(share_responses))
+}
+
+async fn create_share(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Json(create_share_dto): Json<CreateShareDto>,
+) -> Result<Json<Share>, AppError> {
+    let share = Share::create(&pool, auth_user.id, create_share_dto).await?;
+    Ok(Json(share))
+}
+
+async fn get_share(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Path(id): Path<Uuid>,
+) -> Result<Json<ShareResponse>, AppError> {
+    let share = Share::find_by_id(&pool, id).await?;
+    
+    // Check if user has access to this share
+    if share.owner_id != auth_user.id && share.recipient_id != Some(auth_user.id) {
+        return Err(AppError::AccessDenied("You don't have access to this share".to_string()));
+    }
+    
+    let share_response = Share::get_full_share_details(&pool, id).await?;
+    Ok(Json(share_response))
+}
+
+async fn delete_share(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Path(id): Path<Uuid>,
+) -> Result<StatusCode, AppError> {
+    Share::delete(&pool, id, auth_user.id).await?;
+    Ok(StatusCode::NO_CONTENT)
+}
+
+async fn access_shared_file(
+    Extension(pool): Extension<PgPool>,
+    Path(access_key): Path<String>,
+) -> Result<Json<ShareResponse>, AppError> {
+    let share = Share::find_by_access_key(&pool, &access_key).await?;
+    
+    // Check if share is valid (not expired)
+    if let Some(expires_at) = share.expires_at {
+        if expires_at < time::OffsetDateTime::now_utc() {
+            return Err(AppError::AccessDenied("This share has expired".to_string()));
+        }
+    }
+    
+    let share_response = Share::get_full_share_details(&pool, share.id).await?;
+    Ok(Json(share_response))
+}
\ No newline at end of file
diff --git a/api/src/routes/users.rs b/api/src/routes/users.rs
new file mode 100644
index 0000000..e7d3a8e
--- /dev/null
+++ b/api/src/routes/users.rs
@@ -0,0 +1,68 @@
+use axum::{
+    extract::Extension,
+    http::StatusCode,
+    routing::{get, put},
+    Json, Router,
+};
+use serde::{Deserialize, Serialize};
+use sqlx::PgPool;
+
+use crate::error::AppError;
+use crate::models::user::User;
+use crate::services::auth::AuthUser;
+
+pub fn routes() -> Router {
+    Router::new()
+        .route("/users/me", get(get_current_user))
+        .route("/users/me/password", put(update_password))
+}
+
+async fn get_current_user(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+) -> Result<Json<User>, AppError> {
+    let user = User::find_by_id(&pool, auth_user.id).await?;
+    Ok(Json(user))
+}
+
+#[derive(Debug, Serialize, Deserialize)]
+pub struct UpdatePasswordDto {
+    pub current_password: String,
+    pub new_password: String,
+}
+
+async fn update_password(
+    auth_user: AuthUser,
+    Extension(pool): Extension<PgPool>,
+    Json(update_dto): Json<UpdatePasswordDto>,
+) -> Result<StatusCode, AppError> {
+    // Verify current password
+    let user = User::find_by_id(&pool, auth_user.id).await?;
+    let is_valid = crate::utils::password::verify_password(
+        &update_dto.current_password,
+        &user.password_hash,
+    )?;
+
+    if !is_valid {
+        return Err(AppError::AuthenticationError("Current password is incorrect".to_string()));
+    }
+
+    // Hash new password
+    let new_password_hash = crate::utils::password::hash_password(&update_dto.new_password)?;
+
+    // Update password in database
+    sqlx::query!(
+        r#"
+        UPDATE users
+        SET password_hash = $1, updated_at = NOW()
+        WHERE id = $2
+        "#,
+        new_password_hash,
+        auth_user.id
+    )
+    .execute(&pool)
+    .await
+    .map_err(AppError::from)?;
+
+    Ok(StatusCode::OK)
+}
\ No newline at end of file
diff --git a/api/src/services/auth.rs b/api/src/services/auth.rs
new file mode 100644
index 0000000..174936f
--- /dev/null
+++ b/api/src/services/auth.rs
@@ -0,0 +1,72 @@
+use axum::{
+    async_trait,
+    extract::{FromRequest, RequestParts, TypedHeader},
+    headers::{authorization::Bearer, Authorization},
+    http::StatusCode,
+    response::{IntoResponse, Response},
+    Json,
+};
+use serde::{Deserialize, Serialize};
+use std::sync::Arc;
+use uuid::Uuid;
+
+use crate::config::Config;
+use crate::error::AppError;
+use crate::utils::jwt;
+
+#[derive(Debug, Serialize, Deserialize)]
+pub struct AuthUser {
+    pub id: Uuid,
+    pub email: String,
+    pub role: String,
+}
+
+#[async_trait]
+impl<B> FromRequest<B> for AuthUser
+where
+    B: Send,
+{
+    type Rejection = Response;
+
+    async fn from_request(req: &mut RequestParts<B>) -> Result<Self, Self::Rejection> {
+        let TypedHeader(Authorization(bearer)) =
+            TypedHeader::<Authorization<Bearer>>::from_request(req)
+                .await
+                .map_err(|_| {
+                    let json = Json(serde_json::json!({
+                        "error": "Missing or invalid authorization header"
+                    }));
+                    (StatusCode::UNAUTHORIZED, json).into_response()
+                })?;
+
+        let config = req
+            .extensions()
+            .get::<Arc<Config>>()
+            .ok_or_else(|| {
+                let json = Json(serde_json::json!({
+                    "error": "Server configuration error"
+                }));
+                (StatusCode::INTERNAL_SERVER_ERROR, json).into_response()
+            })?;
+
+        let claims = jwt::verify_token(config, bearer.token()).map_err(|e| {
+            let json = Json(serde_json::json!({
+                "error": format!("Invalid token: {}", e)
+            }));
+            (StatusCode::UNAUTHORIZED, json).into_response()
+        })?;
+
+        let user_id = Uuid::parse_str(&claims.sub).map_err(|_| {
+            let json = Json(serde_json::json!({
+                "error": "Invalid user ID in token"
+            }));
+            (StatusCode::UNAUTHORIZED, json).into_response()
+        })?;
+
+        Ok(AuthUser {
+            id: user_id,
+            email: claims.email,
+            role: claims.role,
+        })
+    }
+}
\ No newline at end of file
diff --git a/api/src/services/encryption.rs b/api/src/services/encryption.rs
new file mode 100644
index 0000000..4ae076d
--- /dev/null
+++ b/api/src/services/encryption.rs
@@ -0,0 +1,69 @@
+use aes_gcm::{aead::{Aead, KeyInit}, Aes256Gcm, Nonce};
+use base64::{engine::general_purpose, Engine as _};
+use rand::{rngs::OsRng, RngCore};
+
+use crate::error::AppError;
+
+pub struct EncryptionService {
+    cipher: Aes256Gcm,
+}
+
+impl EncryptionService {
+    pub fn new(master_key: &str) -> Self {
+        // Decode the base64 master key
+        let key_bytes = general_purpose::STANDARD
+            .decode(master_key)
+            .expect("Invalid master key format");
+
+        // Create the cipher
+        let cipher = Aes256Gcm::new_from_slice(&key_bytes)
+            .expect("Invalid key length");
+
+        Self { cipher }
+    }
+
+    pub fn encrypt(&self, data: &[u8]) -> Result<Vec<u8>, AppError> {
+        // Generate a random 12-byte nonce
+        let mut nonce_bytes = [0u8; 12];
+        OsRng.fill_bytes(&mut nonce_bytes);
+        let nonce = Nonce::from_slice(&nonce_bytes);
+
+        // Encrypt the data
+        let ciphertext = self.cipher
+            .encrypt(nonce, data)
+            .map_err(|e| AppError::EncryptionError(e.to_string()))?;
+
+        // Combine nonce and ciphertext
+        let mut result = Vec::with_capacity(nonce_bytes.len() + ciphertext.len());
+        result.extend_from_slice(&nonce_bytes);
+        result.extend_from_slice(&ciphertext);
+
+        Ok(result)
+    }
+
+    pub fn decrypt(&self, data: &[u8]) -> Result<Vec<u8>, AppError> {
+        // Extract nonce and ciphertext
+        if data.len() < 12 {
+            return Err(AppError::EncryptionError("Invalid encrypted data format".to_string()));
+        }
+
+        let nonce = Nonce::from_slice(&data[..12]);
+        let ciphertext = &data[12..];
+
+        // Decrypt the data
+        let plaintext = self.cipher
+            .decrypt(nonce, ciphertext)
+            .map_err(|e| AppError::EncryptionError(e.to_string()))?;
+
+        Ok(plaintext)
+    }
+
+    pub fn generate_master_key() -> String {
+        // Generate a random 32-byte key
+        let mut key = [0u8; 32];
+        OsRng.fill_bytes(&mut key);
+
+        // Encode as base64
+        general_purpose::STANDARD.encode(key)
+    }
+}
\ No newline at end of file
diff --git a/api/src/services/mod.rs b/api/src/services/mod.rs
new file mode 100644
index 0000000..788e13e
--- /dev/null
+++ b/api/src/services/mod.rs
@@ -0,0 +1,3 @@
+pub mod auth;
+pub mod encryption;
+pub mod storage;
\ No newline at end of file
diff --git a/api/src/services/storage.rs b/api/src/services/storage.rs
new file mode 100644
index 0000000..14cfbb7
--- /dev/null
+++ b/api/src/services/storage.rs
@@ -0,0 +1,82 @@
+use std::path::{Path, PathBuf};
+use tokio::fs;
+use uuid::Uuid;
+
+use crate::error::AppError;
+
+pub struct StorageService {
+    base_path: PathBuf,
+}
+
+impl StorageService {
+    pub fn new<P: AsRef<Path>>(base_path: P) -> Self {
+        Self {
+            base_path: PathBuf::from(base_path.as_ref()),
+        }
+    }
+
+    pub async fn save_file(&self, user_id: Uuid, file_id: Uuid, data: &[u8]) -> Result<(), AppError> {
+        let file_path = self.get_file_path(user_id, file_id);
+        
+        // Ensure the directory exists
+        if let Some(parent) = file_path.parent() {
+            fs::create_dir_all(parent).await
+                .map_err(|e| AppError::IoError(e.to_string()))?;
+        }
+        
+        // Write the file
+        fs::write(&file_path, data).await
+            .map_err(|e| AppError::IoError(e.to_string()))?;
+            
+        Ok(())
+    }
+    
+    pub async fn read_file(&self, user_id: Uuid, file_id: Uuid) -> Result<Vec<u8>, AppError> {
+        let file_path = self.get_file_path(user_id, file_id);
+        
+        // Read the file
+        let data = fs::read(&file_path).await
+            .map_err(|e| AppError::IoError(e.to_string()))?;
+            
+        Ok(data)
+    }
+    
+    pub async fn delete_file(&self, user_id: Uuid, file_id: Uuid) -> Result<(), AppError> {
+        let file_path = self.get_file_path(user_id, file_id);
+        
+        // Check if file exists
+        if !file_path.exists() {
+            return Ok(());
+        }
+        
+        // Delete the file
+        fs::remove_file(&file_path).await
+            .map_err(|e| AppError::IoError(e.to_string()))?;
+            
+        Ok(())
+    }
+    
+    pub async fn create_user_directory(&self, user_id: Uuid) -> Result<(), AppError> {
+        let dir_path = self.get_user_directory(user_id);
+        
+        // Create the directory if it doesn't exist
+        if !dir_path.exists() {
+            fs::create_dir_all(&dir_path).await
+                .map_err(|e| AppError::IoError(e.to_string()))?;
+        }
+        
+        Ok(())
+    }
+    
+    pub fn get_file_path(&self, user_id: Uuid, file_id: Uuid) -> PathBuf {
+        let mut path = self.get_user_directory(user_id);
+        path.push(file_id.to_string());
+        path
+    }
+    
+    pub fn get_user_directory(&self, user_id: Uuid) -> PathBuf {
+        let mut path = self.base_path.clone();
+        path.push(user_id.to_string());
+        path
+    }
+}
\ No newline at end of file
diff --git a/api/src/utils/jwt.rs b/api/src/utils/jwt.rs
new file mode 100644
index 0000000..c912148
--- /dev/null
+++ b/api/src/utils/jwt.rs
@@ -0,0 +1,54 @@
+use crate::config::Config;
+use crate::error::AppError;
+use jsonwebtoken::{decode, encode, DecodingKey, EncodingKey, Header, Validation};
+use serde::{Deserialize, Serialize};
+use std::sync::Arc;
+use time::{Duration, OffsetDateTime};
+use uuid::Uuid;
+
+#[derive(Debug, Serialize, Deserialize)]
+pub struct Claims {
+    pub sub: String,
+    pub exp: i64,
+    pub iat: i64,
+    pub email: String,
+    pub role: String, 
+}
+
+pub fn generate_token(
+    config: &Arc<Config>,
+    user_id: Uuid,
+    email: &str,
+    role: &str,
+) -> Result<String, AppError> {
+    let now = OffsetDateTime::now_utc();
+    let expires_at = now + Duration::seconds(config.jwt_expiration);
+
+    let claims = Claims {
+        sub: user_id.to_string(),
+        exp: expires_at.unix_timestamp(),
+        iat: now.unix_timestamp(),
+        email: email.to_string(),
+        role: role.to_string(),
+    };
+
+    let token = encode(
+        &Header::default(),
+        &claims,
+        &EncodingKey::from_secret(config.jwt_secret.as_bytes()),
+    )
+    .map_err(|e| AppError::JwtError(e.to_string()))?;
+
+    Ok(token)
+}
+
+pub fn verify_token(config: &Arc<Config>, token: &str) -> Result<Claims, AppError> {
+    let token_data = decode::<Claims>(
+        token,
+        &DecodingKey::from_secret(config.jwt_secret.as_bytes()),
+        &Validation::default(),
+    )
+    .map_err(|e| AppError::JwtError(e.to_string()))?;
+
+    Ok(token_data.claims)
+}
\ No newline at end of file
diff --git a/api/src/utils/mod.rs b/api/src/utils/mod.rs
new file mode 100644
index 0000000..8d14a23
--- /dev/null
+++ b/api/src/utils/mod.rs
@@ -0,0 +1,2 @@
+pub mod jwt;
+pub mod password;
\ No newline at end of file
diff --git a/api/src/utils/password.rs b/api/src/utils/password.rs
new file mode 100644
index 0000000..09ff7ff
--- /dev/null
+++ b/api/src/utils/password.rs
@@ -0,0 +1,24 @@
+use argon2::{password_hash::SaltString, Argon2, PasswordHash, PasswordHasher, PasswordVerifier};
+use rand::rngs::OsRng;
+
+use crate::error::AppError;
+
+pub fn hash_password(password: &str) -> Result<String, AppError> {
+    let salt = SaltString::generate(&mut OsRng);
+    let argon2 = Argon2::default();
+
+    let password_hash = argon2
+        .hash_password(password.as_bytes(), &salt)
+        .map_err(|e| AppError::PasswordHashError(e.to_string()))?;
+
+    Ok(password_hash.to_string())
+}
+
+pub fn verify_password(password: &str, password_hash: &str) -> Result<bool, AppError> {
+    let parsed_hash = PasswordHash::new(password_hash)
+        .map_err(|e| AppError::PasswordHashError(e.to_string()))?;
+
+    let result = Argon2::default().verify_password(password.as_bytes(), &parsed_hash);
+
+    Ok(result.is_ok())
+}
\ No newline at end of file
diff --git a/docker-compose.yml b/docker-compose.yml
new file mode 100644
index 0000000..5734e17
--- /dev/null
+++ b/docker-compose.yml
@@ -0,0 +1,36 @@
+version: '3.8'
+
+services:
+  web:
+    build:
+      context: .
+      dockerfile: Dockerfile
+    ports:
+      - "80:8080"
+    volumes:
+      - ./data:/data
+    environment:
+      - DATABASE_URL=postgres://litecloud:litecloud_password@db:5432/litecloud
+      - RUST_LOG=info
+      - MASTER_KEY=${MASTER_KEY:-default_master_key_change_in_production}
+      - JWT_SECRET=${JWT_SECRET:-default_jwt_secret_change_in_production}
+      - STORAGE_PATH=/data
+      - MAX_UPLOAD_SIZE=104857600  # 100MB default
+      - DEFAULT_USER_QUOTA=1073741824  # 1GB default
+    depends_on:
+      - db
+    restart: unless-stopped
+
+  db:
+    image: postgres:14-alpine
+    volumes:
+      - postgres_data:/var/lib/postgresql/data
+    environment:
+      - POSTGRES_USER=litecloud
+      - POSTGRES_PASSWORD=litecloud_password
+      - POSTGRES_DB=litecloud
+    restart: unless-stopped
+
+volumes:
+  postgres_data:
+    driver: local
\ No newline at end of file
diff --git a/instructions.md b/instructions.md
new file mode 100644
index 0000000..f94ac85
--- /dev/null
+++ b/instructions.md
@@ -0,0 +1,90 @@
+## Project Prompt: Secure File Hosting Platform (Nextcloud-like)
+
+### Overview
+
+Build a full-stack web application that mimics the core features of Nextcloud with secure file upload, download, and sharing functionality. The stack should be:
+
+- **Frontend**: Flutter Web
+- **Backend**: Rust (Axum framework)
+- **Database**: PostgreSQL
+- **Storage**: Encrypted file storage on local disk
+- **Deployment**: Docker (two-container setup: web + db)
+
+### Required Features
+
+#### Core Features
+
+- Users can upload and download files
+- Files are encrypted at rest using AES-256 (server-side encryption)
+- Users can generate public shareable links to download files
+- File upload limits per user (configurable)
+- Support for shared folders among users (with permissions)
+- Serve Flutter web UI and backend API from the same container
+
+#### Authentication and User Management
+
+- User registration and login using email + password
+- Passwords must be securely hashed using Argon2 or bcrypt
+- JWT-based session handling for API authentication
+- Role-based permission system:
+  - Owner, editor, viewer roles for shared folders
+  - Users can only access files and folders they own or are shared with them
+
+#### File Handling
+
+- Store files in `/data` directory, encrypted using a per-file key
+- Save metadata and encryption keys in PostgreSQL (keys encrypted with a master key)
+- Expose REST endpoints:
+  - POST `/api/upload`
+  - GET `/api/download/:id`
+  - POST `/api/share`
+  - GET `/api/shared/:token`
+- Limit file uploads per user (configurable max size)
+- Maintain a file tree (directories, nested folders)
+
+### Infrastructure
+
+- Use Docker Compose to define:
+  - `web`: Rust backend and Flutter frontend in a single container
+  - `db`: PostgreSQL container
+- Only expose one public port (80), used by the web container
+- Use Docker volume for persistent file storage (`./data`)
+
+### Project Structure
+
+```
+project-root/
+├── docker-compose.yml
+├── Dockerfile (multi-stage for Flutter + Rust)
+├── backend/         # Rust API
+├── frontend/        # Flutter Web app
+├── data/            # Mounted volume for encrypted files
+```
+
+### Libraries and Tools
+
+- **Rust Backend**:
+
+  - `axum` for HTTP server
+  - `tokio` for async runtime
+  - `sqlx` for PostgreSQL
+  - `jsonwebtoken` for JWT
+  - `argon2` or `bcrypt` for password hashing
+  - `aes-gcm` or `ring` for file encryption
+  - `uuid` for file and share link identifiers
+  - `dotenvy` to manage environment variables
+- **Flutter Frontend**:
+
+  - File upload UI
+  - Folder navigation
+  - Login/Register screens
+  - Share file dialog with permission settings
+
+### Goals
+
+Generate:
+
+- Docker Compose config and Dockerfile
+- Flutter web UI skeleton with login/upload functionality
+- Rust backend with user authentication, file handling, and share APIs
+- PostgreSQL schema with users, files, shares, and permissions