That’s exactly what happens. We encrypt client side. The sever only gets encrypted data. You can inspect the network request to see what the sever receives. Your decryption key always stays client side (in the url fragment).
Also, the short URL (which saves the content in cypher format on the server) is optional. It only triggers if you specifically trigger it (by clicking “Generate” at the top of the rendered document). If you don’t click that everything stays client side in the fragment.