I am sorry for all people that said there is no solution...because I have it
We all agree encryption is a bad solution, but why ?
Because it is client-side, and we can't trust a client
So the simple solution is a SRM (Skins Rights Management).
When you upload your skin to LFS World, an advanced algorithm will check if the skin is not already uploaded by someone else (not by checking the filename but by checking the picture itself !).
If it is not already uploaded, the author of the skin become the one who uploaded it. Once you uploaded it, you can manage the rights on this skin directly on LFS World : you can put it viewable for all users / few users / 1 user / no user and "usable" for all users / few users / 1 user / no user.
For the viewable part, it is easy, if you don't have the right to see it, it will not be downloaded when you join the game (DEFAULT_SKIN on other clients)
For the usable part, it will not change anything for any user, the skin will still be downloaded to "skins_x" folder and a bad user can still copy it to "skins" directory and play online with it ! BUT every users (except himself) will see his skin as a blank skin or even better "I_steal_a_skin.dds"
How it works ?
It's simple, when the bad user copied the skin from "skins_x" directory, he didn't renamed the filename (because he wants other people see his nice skin freshly stolen)...so the LFS server also know the name of the skin and an algorithm will just check if the LFS username has rights to use this skin [on the LFSWorld database] : if he doesn't he will send to all other clients to load "I_steal_a_skin.dds" instead of the good "dds" file
So as you can see it is server-side protection and it's way better than encryption because the bad guy don't even know that his skin is not show on other clients