The clipper chip used what is called a skipjack algorithm, which was developed by the U.S. National Security Agency (NSA) and classified as secret. It contained the CAPSTONE chip, which provided all cryptographic processing. The clipper chip was supposed to be adopted by all telecommunication companies in the U.S. to provide encryption, thus preventing outside eavesdropping. However, there was a back door; the government had the decryption key and anyone legally authorized could gain access to the key and decrypt all messages.

The clipper chip provoked backlash from the public and the computer industry as a whole because of potential privacy issues and possible abuse. The Electronic Privacy Information Center and the Electronic Frontier Foundation challenged the proposal, saying that it could subject citizens to possible illegal surveillance. In addition, individuals and the business sector might get stuck with an insecure communication system, as the clipper chip’s encryption and secret classification could not be evaluated by the public.