HC-128 is a strong candidate of eSTREAM Project. The resistance of this algorithm against cryptanalytic attacks has been analyzed by several researchers. We analyze its security in terms of its variability and non-linearity. A strong crypto-algorithm should have full variability. By 'variability of an algorithm' we mean the number of distinct sequences, the algorithm can produce. Full variability means that the algorithm produces as many distinct sequences as there are key-IV pairs. There are research papers which indicate that the algorithm may have the full variability. However, no concrete proof is given. In this paper we present a deterministic proof of full variability of HC-128. Non-linearity plays an important role in determining the security of a crypto-algorithm. Because of the complicated nature of the algorithm, determining the exact degree of the HC-128 function is quite difficult. In this paper, we demonstrate that the degree of non-linearity of key and IV setup function of HC-128 is very high and it is computationally hard to invert the cipher with the knowledge of key stream only.
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