SSH does nearly the same, with keys used once per machine. "Password" isn't imo a good word for this: they should be random, not user-generated.
The most obvious way to implement such encrypted passwords allows the data to be decoded later when the attacker (i.e. server operator) gets one of the private keys. (There are special key exchange protocols that solve this problem.) What I think we should do: 1. use existing protocols for all things involving cryptography or sending the data; SSH has well-known solutions for authentication 2. maybe use a custom protocol for requesting access and getting VNC server addresses (SIP solves a similar problem). Or maybe use existing IM protocols or email for it? 3. make hosting servers for it as easy as possible, maybe just require a TURN server (that users interested in federated VoIP will already have) and maybe a simple service for 2. There already are solutions hosted by others. 4. have less options than VNC has.
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