Princeton computer science profession Ed Felten has an excellent explanation of what it means to security to have the NSA actively sabotaging cryptographic standards and tools. As he points out, the least secure situation is to believe that you are secure when you are not -- a car without breaks can be driven slowly and cautiously, if you know the brakes are shot. But if you don't know the brakes are out, you're likely to discover the fact the hard way.
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On the Cryptography mailing list, John Gilmore (co-founder of pioneering ISP The Little Garden and the Electronic Frontier Foundation; early Sun employee; cypherpunk; significant contributor to GNU/Linux and its crypto suite; and all-round Internet superhero) describes his interactions with the NSA and several obvious NSA stooges on the IPSEC standardization working groups at the Internet Engineering Task Force. It's an anatomy of how the NSA worked to undermine and sabotage important security standards. For example, "NSA employees
explicitly lied to standards committees, such as that for cellphone
encryption, telling them that if they merely debated an
actually-secure protocol, they would be violating the export control
laws unless they excluded all foreigners from the room (in an
international standards committee!)."
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Errata Security CEO Rob Graham has published a blog-post speculating that ninety percent of the traffic on the Tor anonymized network can be broken by the NSA. That's because the majority of Tor users are still on the an old version of the software, 2.3, which uses 1024 RSA/DH keys -- and at keylengths of 1024 RSA/DH crypto can be broken in a matter of hours using custom chips fabbed at an estimated cost of $1B. It seems likely that the NSA has spent the necessary sum and sourced these chips (likely from IBM).
This isn't the same as being able to decrypt all of Tor in realtime, but it does suggest that the NSA could selectively decrypt its stored archives of Tor traffic.
However, the new version of Tor, 2.4, uses elliptical curve Diffie-Hellman ciphers, which are probably beyond the NSA's reach.
Graham faults the Tor Project for the poor uptake of its new version, though as an Ars Technica commenter points out, popular GNU/Linux distributions like Debian and its derivative Ubuntu are also to blame, since they only distribute the older, weaker version. In either event, this is a wake-up call that will likely spur both the Tor Project and the major distros to push the update.
Yesterday's revelations about the NSA's ability to decrypt 'secure' communications were taken by many to mean that the NSA had made fundamental mathematical or computing breakthroughs that allowed it to decrypt securely enciphered messages. But it's pretty clear that's not what's going on.
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