[BUG]

Bug Description

Title: .claude.json incorrectly stores chat history instead of configuration only

Description:
Claude Code is storing conversation history in ~/.claude.json which should only contain configuration data according to the documentation. This causes the file to grow with chat data and contradicts the documented behavior
where settings should be in .claude/settings.json files.

Expected Behavior:

• .claude.json should contain only configuration data (userID, installMethod, autoUpdates, etc.)
• Chat history should be stored separately or in documented session files
• Settings should follow the documented structure using .claude/settings.json files

Actual Behavior:

• .claude.json contains a projects[].history[] array that stores user messages
• File grows indefinitely with conversation data
• Every user message gets added to the history array

Evidence:
"projects": {
"C:\\Users\\bryan\\Development\\Projects": {
"history": [
{
"display": "user message text here",
"pastedContents": {}
}
]
}
}

Impact:

• Configuration file becomes bloated with non-config data
• Potential privacy concerns with chat history in unexpected location
• Conflicts with documented settings file structure
• File monitoring shows constant writes for every user interaction

Steps to Reproduce:

1. Initialize Claude Code in a directory
2. Send any message to Claude
3. Check ~/.claude.json - it will contain the message in projects[directory].history[]

System Info:

• Claude Code version: 1.0.81
• OS: Windows 10/11
• Platform: win32