OTP (One-Time Password)

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What is an OTP (One-Time Password)?

A one-time password (OTP) is a unique passkey that is generated by a special type of authentication software. Unlike traditional passwords, which are static and can be reused, OTPs are dynamic and can only be used once.

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One-time passwords play an important role in two-factor authentication (2FA), which requires the user to share something they know (their password) and something they have (a one-time password).

What is an OTP (One-Time Password)?  

Key Takeaways

  • A one-time password is a unique passkey that is valid for a single use.
  • OTPs are often used in two-factor authentication schemes.
  • Server-side OTPs are automatically delivered to the user through a pre-registered SMS text,  email message, phone call, or push notification.
  • Client-side OTPs are generated with hardware tokens or authenticator apps.
  • To provide an additional layer of security, most OTPs expire after 60 seconds.

How OTP Works

The way OTP works depends on whether the unique one-time passkey is generated server-side or client-side.

Server-side OTPs use an algorithm and a secret key to generate a six-digit passcode.  When the user enters their authentication credentials, the server verifies the username and password with an authentication database. If the credentials are valid, the server generates an OTP and sends it to the user in an SMS text message, email message, phone call, or push notification.

Client-side OTPs use an algorithm and a secret key as well, but they share the secret key with the client’s authentication app or USB security token during set-up.

When the user inserts the token and presses a button or opens the authentication app, the token or app generates an OTP, and the server generates the same OTP at the same time.

How to Get One-Time Password

How you get a one-time password depends on whether you are using a server-side or client-side OTP authenticator.

  • If the OTP application is server-side, one-time passwords are automatically delivered to the user.
  • If the OTP application is client-side, the user needs to generate the OTP with an authenticator app or USB security token.

How to Get One-Time Password

Generally, hardware tokens for one-time passwords are more expensive than software-based authenticator apps. They are often issued by the user’s employer, and because they are small peripherals, they can easily be lost.

In contrast, authenticator apps like Google Authenticator are available at major app stores and can usually be acquired for free. Additionally, many password managers and identity and access management (IAM) security software suites have built-in authenticator functionality.

Types of OTPs

One-time passwords are often categorized by whether they use HOTP or TOTP algorithms to generate one-time passwords.

Hashed-based one-time passkey (HOTP) algorithms
Generate OTPs by using a secret key and a counter that changes with each use. This approach can be useful for situations where time synchronization between a client and server is difficult or Internet access is unreliable.
Time-based one-time password (TOTP) algorithms
Generate OTPs by using a secret key and the current time. This approach is popularly used for both client-side and server-side OTPs. Its underlying mechanism (time) is considered to be more granular and secure than a counter.

Use Cases of OTPs

In addition to providing an additional authentication factor for multi-factor authentication (MFA), OTPs are often used to:

  • Verify logins made from a new geographic location or from a new device.
  • Verify changes to account details.
  • Provide a temporary password replacement.
  • Verify large financial transactions.
  • Serve as the primary means of login.

An OTP Example

“835172” is an example of a one-time password. Most OTPs are six digits because six digits have a million possible combinations. This makes it difficult for an attacker to guess the passkey within a short time frame.

Benefits of OTP

OTPs mitigate password fatigue by eliminating the need for users to remember passkeys. Both server-side and client-side OTPs typically have a short lifespan to minimize the window for unauthorized use.

While some users might consider one-time passwords an inconvenient extra step, OTPs are generally considered to be a minor inconvenience when compared to the cybersecurity benefits they provide.

OTP Security

OTPs can significantly reduce the risk of successful replay attacks.

In this type of man-in-the-middle cyber exploit, the threat actor tries to capture a username and password from a valid authentication request and use it later on to gain unauthorized access.

Because OTPs can only be used once, however, and most OTPs become invalid after 30-60 seconds, even if an attacker successfully captures an OTP, they won’t be able to use it for subsequent authentication attempts.

The choice between client-side and server-side OTPs often depends on the desired level of security and convenience for end users.

In general, client-side OTPs are considered to be more secure than server-side ones because they are generated locally and don’t have to be transmitted over the Internet. This reduces the attack surface.

Server-side OTPs are more common, however, because they cost less to implement, they are designed to be used intuitively, and they provide an acceptable level of security for many online services and transactions.

OTP Pros and Cons

One-time passwords provide an additional layer of authentication that is difficult for attackers to compromise. However, OTPs can also introduce friction into the user experience because the extra authentication step may frustrate users.

Overall, OTPs need to strike a balance between security and convenience, and their effectiveness depends on proper implementation and user cybersecurity awareness.

Pros
  • Provides second authentication factor
  • Improves security
  • Reduces password fatigue
  • Widely implemented
Cons
  • May be challenging to integrate with existing authentication systems
  • Can be inconvenient for end users

The Bottom Line

Users who aren’t familiar with OTP’s meaning in a security context often think that the acronym OTP stands for “on the phone.” That’s because many OTPs are generated server-side and delivered to users in text messages.

When desktop users have to stop, get their phone, locate the text message, and try to enter the OTP before it times out, this can create a poor user experience (UX). Educating users about OTP’s meaning and the value of OTPs as a second authentication factor can help alleviate user frustration.

FAQs

What is a One-Time Password in simple terms?

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What is an example of an OTP password?

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How does a one-time password work?

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Margaret Rouse
Senior Editor
Margaret Rouse
Senior Editor

Margaret is an award-winning technical writer and teacher known for her ability to explain complex technical subjects to a non-technical business audience. Over the past twenty years, her IT definitions have been published by Que in an encyclopedia of technology terms and cited in articles by the New York Times, Time Magazine, USA Today, ZDNet, PC Magazine, and Discovery Magazine. She joined Techopedia in 2011. Margaret's idea of a fun day is helping IT and business professionals learn to speak each other’s highly specialized languages.