What is One Time Password? OTP Types, Benefits, Working in 2023

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    What is OTP

    A onetime password, also known as a passcode (OTP), is a string of characters or numbers that authenticates a person to log in for a single time or transaction. A computer algorithm creates an individual value for each one-time passcode by including contextual information like time-based data or prior logins.

    Tech support teams typically provide OTPs to those who have forgotten their login credentials for websites or accounts or when the website or account requires additional security from unauthorized access attempts. OTPs also provide an additional layer of security that a user who is not verified will have to go through before accessing an account.

    What types of OTPs are there?

    OTP authentication is made possible due to tokens. There are several types available.

    Hard tokens  

    “Hard tokens” (as used by hardware) are devices made of physical material that transmit OTPs to help people gain access to their accounts and other resources. They broadly cover:

    • Connected tokens: These tokens connect to the device or system they’re trying to connect to. USB drives and smart cards are USB drives are put into the device’s smart card reader as well as the USB port, respectively.
    • Disconnected: The popular token used for multifactor security (MFA). While users don’t need to physically insert the tokens, disconnected tokens generally create OTPs that users can enter. Key fobs that are small enough for a pocket and keyless entry systems, mobile phones, and banking security devices are a few examples of this happening.
    • Contactless Token: The tokens send information regarding authentication to a computer system, analyzing the data to determine whether the user has access rights. Tokens that are Bluetooth-compatible illustrate contactless communication without mechanical connections or manually input.

    Soft tokens

    Soft tokens (as in software) aren’t tangible objects we own. Instead, they are software in a device such as a laptop or mobile phone. Soft token authentication typically comes in the form of an app that will send SMS or push notifications to the user, which they must respond to and confirm the authentic identity.

    All of them follow the same fundamental process: the user transmits an authentication code to a system, and the system determines if the information is accurate, and if it is, it gives the user access. The same principle applies to using a password but using OTP, OTP the information used for authentication isn’t leaking or traveling beyond the user or the system that it is intended for.

    How does an OTP password work?

    To allow a one-time password to be effective, both the user and the system it is utilizing must be aware of the password. There are two ways to make sure this is done:

    Password list

    Password lists are the most efficient method of using one-time passwords. It is an already-constructed database of passwords accessible to both users and systems. When one of the unique passwords is employed, the user simply removes it from the database.

    The drawback to this method is clear. If someone loses the list, anyone may gain access to passwords. While a list of one-time passwords remains often used in online banking, companies are increasingly moving towards dynamically-generated OTP passwords for the reasons mentioned above.

    Dynamically generated passwords

    Today’s dynamic, one-time passwords are currently the most popular method of use. In addition, hardware tokens are extensively utilized to generate passwords. These tiny devices are available in various forms, such as key fobs or keypads.

    They’re also known as OTP tokens. However, they generally include a screen and create one-time passwords to an account with the press of a button. The passwords created by such devices are typically used in conjunction with other authentication factors such as PINs and user IDs.

    A specific algorithm is used to create an evolving password instantly. There are three algorithm choices:

    • Time-based
    • Event-based
    • Challenge-response


    Using this method, the security token (client) and server can generate synchronized encrypted passwords by employing similar algorithms. This kind of time-based onetime password (TOTP) is therefore recognized on both the client and the server side. Moreover, it can be used for a set time frame, typically between 1 and fifteen minutes.


    Onetime passwords based on events are created by performing a particular action, like pressing an icon in the security token. Like the time-based method, the exact algorithm is employed on both the server and user sides. Passwords are calculated using the previous password so it can be verified through the servers.

    Challenge-response based

    In this way, the server inquires (challenge) that the client must respond to (response). The client gets a specific value from the server and utilizes it to determine a one-time password. Because the server is aware of the algorithm and the given value, it can verify the password generated.

    Benefits of OTP

    Safe against replay attack

    The most significant benefit offered by OTPs, in contrast to individual passwords, is the fact that they’re secure in the face of replay-based attacks. In simple terms, the case of an attacker who employs techniques to obtain your OTP cannot use it again since it’s no more valid for subsequent sessions or logins.

    Allows you to ensure the security of your email

    security of your email
    security of your email

    OTPs are usually delivered to mobile devices through SMS. So you don’t need to access your email account. Therefore, you’ll be able to avoid having to log into your email account from computers that are not accessible to the public or while connected to a Wi-Fi hotspot.

    Convenient to use 

    Most people own smartphones with SMS capabilities, which are present on all devices. Because SMS is ubiquitous, onetime passwords are simple to use. This benefits companies who provide the OTPs since the end-users know their mobiles and don’t require a second device to access the code. Therefore, OTPs help businesses not only enhance user experience but also lower their operating costs.

    How can I get a one-time password?

    otp generator

    For the user who is on the receiving end To the end user, obtaining an OTP is a breeze and secure, which makes the experience yet simple. Here’s a good illustration:

    1. A client attempts to log in to their online bank account via their mobile.

    2. It doesn’t recognize the device. They provide a verification code by SMS, phone call, or push notification email to safeguard the user’s information.

    3. After the client has chosen the preferred delivery method and receives an OTP key in a matter of seconds.

    4. The user is prompted to enter the login process, entering their password, ID number, and password. You’re welcome to use all of their online banking tools.

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