A team of Chinese engineers say they have unraveled the protocol for Skype, and vow to release their own third-party Skype client before the end of August. VoIP guru Charlie Paglee says he talked with one of the members of the team which reverse-engineered the Skype protocol, and actually received a Skype call from that person who was able to prove that he was using the reverse engineered software by sending Paglee the IP address of his PC, information that's always encrypted during a conventional Skype call.
Meanwhile, Skype dismissed the claim, insisting this development would have no effect on Skype's cryptographic security or integrity. However, the engineers who claim to have cracked the code say that they can also block Skype voice traffic. This would be a welcome feature in China, which has already ruled Skype software illegal. Since Skype software currently hijacks its users' computers to propagate its voice calls, the capability of blocking that voice traffic could do some serious damage to the Skype business model. This could make it possible to send and receive Skype calls without having any calls going through your computer, resulting in lots of holes in the network.