so currently you have 40-50k users that authenticate through a mechanism you built previously?
What type of authentication is it? JWT?
You could potentially write your own DreamFactory OAuth module to use your existing authentication scheme as an OAuth provider (similar to how we have the facebook and google OAuth services.) That might be the easiest way to accommodate such a large number of users.
Otherwise, yes, every user will need to have their own login to DF (either directly or through AD, Facebook, Google, etc.)
And you can use lookup keys to link DF users to user data in your external database.