I was looking for a information about encryption algorithm used in KWallet, but wasnt able to find anything. I saw that there was a option to choose between GPG and Blowfish, but I wasn't given that option. Next I read that they removed GPG. So I would like to ask what it uses now? Is it GPG and Blowfish, or only GPG/Blowfish?

And I would like to ask if it still uses SHA-1 for hashing the master password?

Thanks

I'm not aware of any documentation on this - you'll need to reference the source code to determine what the case is here. The code can be found in kdelibs I believe.