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Does Watch use HTTPS for data transmission?

Yes. Computer-to-cloud Watch traffic uses HTTPS, while the default ActivityWatch read happens locally over HTTP on 127.0.0.1.

Watch Sync sends uploads to https://awd.qsseda.com by default and authenticates them with a Bearer device token, so internet-facing data transmission uses HTTPS/TLS.

The sync tool reads ActivityWatch at http://127.0.0.1:5600 by default. That connection is local loopback traffic inside the computer and does not expose plain HTTP to the public internet.