I like the idea (though I think with enough abstraction, you could have it also replicating itself to "regular" cloud).
The main fight needs to happen at application level, not infrastructure. Cloud services are already mostly transparent and interchangeable. But applications aren't. The problem is, it's the application vendor that owns the code, determines where's going to run, and asks you to send over the data. How it should be working, is that you own the data and determine location of computing, and own or rent code to be run on that data.
Any idiot who breaks into your home would be well positioned to steal your server along with all of your memories and use them for ransom/blackmail/etc.
As opposed to any idiot who breaks into your IoT provider's server?
An encrypted hard disk with the key on a USB stick would be enough, just keep the key somewhere separate and you'll only have to plug it in when there's a power outage.
