Skype is to heavy for me to write. Here is a copy of wikipedia. See full article with all References and Notes here : https://secure.wikimedia.org/wikipedia/en/wiki/Skype_security

Skype security -From Wikipedia, the free encyclopedia

Skype is a Voice over Internet Protocol (VoIP) system developed by Skype Technologies S.A. It is a peer-to-peer network in which voice calls pass over the Internet rather than through a special purpose network. Skype users search for other users to connect to, enabling them to search other Skype users and send them messages. Skype uses 256 bit AES encryption to encrypt communication between users, complicating the decryption of these communications. Skype's encryption is inherent in the Skype Protocol and is transparent to callers. Because of this integration the communication between users is considered to be private, although several security concerns exist.

The company's Security Policy includes:

Usernames are unique. Callers must present a username and password or other authentication credential. Each caller provides the other with proof of identity and privileges whenever a session is established. Each verifies the other’s proof before the session is allowed to carry messages. Messages transmitted are encrypted from caller to caller. No intermediate node (router) has access to the meaning of these messages.
Implementation and protocols

Registration

Skype holds registration information both on the caller's computer and on a Skype server. Skype uses this information to authenticate call recipients and to assure that callers seeking authentication are accessing a Skype server rather than an impostor. Skype uses public key encryption as defined by RSA to accomplish this.

The Skype server has a private key, and distributes that key's public counterpart with every copy of the software. As part of user registration, the user selects a desired username and password. Skype locally generates public and private keys. The private key and a hash of the password are stored as securely as possible on the user's computer.

Then a 256-bit AES-encrypted session is established with the Skype server. The client creates a session key using its random number generator.

The Skype server verifies that the selected username is unique and that follows Skype's naming rules. The server stores the username and a hash of the hash of the user's password [H(H(P))] in its database.

The server now forms and signs an identity certificate for the username that binds the username, its verification key and the key identifier.

Peer-to-peer key agreement

For each call, Skype creates a session with a 256-bit session key. This session exists as long as communication continues and for a fixed time afterward. As part of connecting a call, Skype securely transmits the session key to the call recipient. That session key is then used to encrypt messages in both directions.

Session cryptography

All traffic in a session is encrypted using the AES algorithm running in Integer Counter Mode (ICM). Skype encrypts the current counter and a salt with the session key using the 256 bit AES algorithm. This returns the key stream, which is then XORed with the message content. This produces encrypted ciphertext, which is then transmitted to the recipient. Skype sessions contain multiple streams. The ICM counter depends on the stream, and the location within the stream.

Random number generation

Skype uses random numbers for several cryptographic purposes, for instance as a protection against playback attacks, creation of RSA key pairs, and creation of AES key-halves for content encryption. The security of a Skype peer-to-peer session depends significantly on the quality of the random numbers generated by both ends of the Skype session. Random number generation varies by operating system.

Cryptographic primitives

Skype uses standard cryptographic primitives to achieve its security goals. The cryptographic primitives used in Skype are: the AES block cipher, the RSA public-key cryptosystem, the ISO 9796-2 signature padding scheme, the SHA-1 hash function, and the RC4 stream cipher.

Key agreement protocol

Key-agreement is achieved using a proprietary, symmetric protocol. To protect against a playback attack, the peers challenge each other with random 64-bit nonces. The challenge response is to customize the challenge in a proprietary way and returned it signed with the responder’s private key.

The peers exchange Identity Certificates and confirm that these certificates are legitimate. Because an Identity Certificate contains a public key, each end can then confirm signatures created by the other peer. Each peer contributes 128 random bits to the 256-bit session key.

Flaws and potential flaws

While Skype encrypts users' sessions, other traffic including call initiation can be monitored by unauthorized parties.

The other side of security is whether Skype imposes risk on its user's computers and networks. In October 2005 a pair of security flaws were discovered and patched. Those flaws made it possible for hackers to run hostile code on computers running vulnerable versions of Skype. The first security bug affected only Microsoft Windows computers. It allowed the attacker to use a buffer overflow to crash the system or to force it to execute arbitrary code. The attacker could provide a malformed URL using the Skype URI format, and lure the user to request it to execute the attack. The second security bug affected all platforms; it used a heap-based buffer overflow to make the system vulnerable.

• By default, Skype also records data about calls (but not the message contents) in a "History" file saved on the user's computer. Attackers who gain access to the computer can obtain the file.
  
  
• Skype can consume other users' bandwidth. Although this is documented in the license agreement (EULA), there is no way to tell how much bandwidth is being used in this manner.
  
  
• There are some 20,000 supernodes out of many millions of users logged on. Skype Guide for network administrators claims that supernodes carry only control traffic up to 10 kB/s and relays may carry other user data traffic up to 15 kB/s (for one audio conference call). A relay should not normally handle more than one "relayed connection".
  
  
• Skype's file-transfer function does not integrate with any antivirus products, although Skype claims to have tested its product against antivirus "Shield" products.
  
  
• Skype does not document all communication activities. This lack of clarity as to content means that systems administrators cannot be sure what it is doing. (The combination of an invited and a reverse-engineered study taken together suggest Skype is not doing anything hostile). Skype can be easily blocked by firewalls.
  
  
• Skype consumes network bandwidth, even when idle (even for non-supernodes, e.g., for NAT traversal). For example, if there were only 3 Skype users in the world and 2 were communicating, the 3rd computer would be taxed to support the application, even if not using Skype at the time. The large number of Skype computers means that this activity is diffuse, it can lead to performance issues on standby Skype users, and presents a conduit for security breaches.
  
  
• Skype implicitly trusts any message stream that obeys its protocols
  
  
• Skype does not prohibit a parallel Skype-like network
  
  
• Skype makes it hard to enforce a corporate security policy
  
  
• Lack of peer review prohibits external security code verification.
  
  
• Skype creates a file called 1.com in the temp directory which is capable of reading all BIOS data from a PC. According to Skype this is used to identify computers and provide DRM protection for plug-ins.
  
  
• The URI handler that checks URLs for verification of certain file extensions and file formats uses case sensitive comparison techniques and doesn’t check all potential file formats.
  
  
• While Skype does encrypt most of its communications, packets containing advertisements are unencrypted which are pulled from several places, exposing a cross-site scripting vulnerability. These ads can easily be hijacked and replaced with malicious data.
  The privacy of Skype traffic may have limits. Although Skype encrypts communication between users, a Skype spokesman did not deny the company's ability to intercept the communication. On the question of whether Skype could listen in on their users' communication, Kurt Sauer, head of the security division of Skype, replied evasively: "We provide a secure means of communication. I will not say if we are listening in or not." In China filters text according to government requirements. This suggests that Skype has the capacity to eavesdrop on connections. One of Skype's minority owners, eBay, has divulged user information to the U.S. government.
  
  
• Security researchers Biondi and Desclaux have speculated that Skype may have a back door, since Skype sends traffic even when it is turned off and because Skype has taken extreme measures to obfuscate their traffic and functioning of their program. Several media sources have reported that at a meeting about the "Lawful interception of IP based services" held on 25 June 2008, high-ranking but not named officials at the Austrian interior ministry said that they could listen in on Skype conversations without problems. Austrian public broadcasting service ORF, citing minutes from the meeting, have reported that "the Austrian police are able to listen in on Skype connections". Skype declined to comment on the reports.
  
  
• The United States Federal Communications Commission (FCC) has interpreted the Communications Assistance for Law Enforcement Act (CALEA) as requiring digital phone networks to allow wiretapping if authorized by an FBI warrant, in the same way as other phone services. In February 2009 Skype said that, not being a telephone company owning phone lines, it is exempt from CALEA and similar laws which regulate US phone companies, and in fact it is not clear whether Skype could support wiretapping even if it wanted to.
  According to the ACLU, the Act is inconsistent with the original intent of the Fourth Amendment to the U.S. Constitution; more recently, the ACLU has expressed the concern that the FCC interpretation of the Act is incorrect