Sean O'Neil, a security developer (or at least an amateur one), has posted code that is binary-compatible with an obfuscated version of RC4 that is used to protect Skype control traffic (user searches, profiles, contact lists). O’Neil says that the obfuscated version of RC4 is keyless and serves no useful security purpose, but its presence is intended to render Skype incompatible with other messaging clients, effectively making it a proprietary system. Even though Skype was intending to open its APIs to all desktop clients soon enough, O’Neil sees himself as buster of Skype’s 10 year monopoly.
The story is being widely reported in the press (see links below), and it is easy to assume that the general security of Skype has been compromised, especially when O’Neil’s own post carried the title Skype’s Biggest Secret Revealed. But the secret was disentangling the modified version of RC4 from Skype’s operation. User privacy remains protected since full strength versions of AES-256, RSA-1024 and RSA-2048 are used to encrypt session traffic. The code itself is surely obfuscated since the source is over 2800 lines of C, when 50 or so is enough to implement RC4.
The full implications of the discovery are still playing out, and whether losing their biggest secret poses a serious issue for Skype. O’Neil is promising to release more details at the Chaos Communication Conference in Berlin this December.