What is OTP? [Key to Online Security]

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Maxym Chekalov
Written by
Maxym Chekalov

Updated · Nov 16, 2023

Maxym Chekalov
SEO Specialist | Joined June 2023 | LinkedIn
Maxym Chekalov

With a master's degree in telecommunications and over 15 years of working experience in telecommunic... | See full bio

April Grace Asgapo
Edited by
April Grace Asgapo


April Grace Asgapo
Joined June 2023 | LinkedIn
April Grace Asgapo

April is a proficient content writer with a knack for research and communication. With a keen eye fo... | See full bio

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When you try to log in to a website or app, you will often see this:

Sample OTP screen

A screen asking for a code pops up. That code is known as an OTP or “one-time password.” 

OTPs work as an added layer of security to verify the identity of users. According to statistics, 81% of data breaches are due to weak passwords. This is why more companies are using OTPs

Continue reading to take a closer look at what OTPs are and their importance to online security.

Understanding What OTPs Are

An OTP is a unique password valid for a single log-in session or transaction—thus the term "one-time." Usually, users will get it through an SMS, phone call, or authenticator app. 

To further understand OTPs, here are some examples:

1. SMS-based OTP

Google verification through an OTP sent via SMS

To sign in or proceed with a transaction, a user must enter the authentication code on the SMS that they will receive. Most people use this type of OTP since it is more convenient.

2. Hardware OTP Tokens

Hardware OTP Tokens

Hardware OTP tokens are tiny devices that generate a new password whenever someone uses them. This is one of the most secure methods of generating OTPs.

3. Software OTP Tokens

Example of a generated software OTP token

This token provides a two-factor authentication system that generates an OTP. The code comes from a shared secret key installed on smartphones and computers.

How OTPs Work

Apps and sites that involve sensitive data use OTP as part of their security. Services like online banking and e-commerce enforce OTPs

Authenticating access with OTP is proven to be more secure since the process involves secret keys, time-based components, and counters.

How OTP generates 

To better grasp how OTP works, read this step-by-step explanation:

1. An authentication-required action triggers OTP use.

OTP starts to work when a user triggers an action that needs authentication, like logging into an account or doing bank transfers.

2. Server generates a random secret key.

The server will generate a random secret key if the app asks for authentication. 

3. Server sends the key to the user.

The server will send the key to the user's device once generated. It can be through text, email, or another app.

4. User inputs received key.

Once the OTP code is received, the user must put it in the app or service that asks for it. 

5. Server verifies the received key.

When the server receives the OTP, it will check if it matches the generated key.

6. Server allows or denies access based on the key.

The server will allow the user to access the app or continue the action if the keys are the same. If there’s a mismatch, the server will deny access.

Methods to Generate OTPs

Servers create OTPs based on pseudo-randomness, meaning true randomness algorithms. 

All the OTPs generated by these algorithms are unique and secure, preventing attackers from predicting the code.

The algorithms also often use hash functions to derive the OTP value. This makes it difficult for attackers to get the original data used for the hash. 

Without these measures, attackers can predict future OTPs by observing the patterns of the previous ones.

Below are some of the known methods used to generate OTPs:

Different ways to generate OTPs

  • COTP (Challenge-Response One-Time Password)

COTP is based on a mathematical algorithm on the server's challenges and a secret key. It is the usual authentication method used when accessing remote systems.

  • TOTP (Time-Based One-Time Password)

TOTP is an OTP algorithm that generates passwords based on the current time. This is common in two-factor authentication (2FA), providing extra security besides a user's actual password. OTPs in this method are valid for a limited time only.

  • HOTP (HMAC-Based One-Time Password)

HOTP is an OTP algorithm based on a counter and a secret key. It generates a password based on the previous password.

TOTP and HOTP are comparable in many ways. Check out this video to learn the benefits of using each type:

Why Should You Use OTPs

More and more organizations now prefer using OTPs due to how safe they are. 

However, whether you’re an individual or corporation that is still not convinced of the effectiveness of OTPs, below are reasons why you should consider them on your next online transaction:

1. OTPs are Unique and Time-Sensitive

An OTP code is only usable once. It expires after a specific time, making it difficult for an attacker to intercept.

2. Users Do Not Need to Remember

Almost 50% of people in the US manage their passwords with their memories alone. However, with OTPs, you do not need to remember every single code since a new one is generated for every use.  

You simply have to wait for your OTP via text, email, or authenticator app. Many users enjoy this passwordless authentication method.

📖 Definition

Passwordless authentication is a security measure that uses possessive or biometric factors. This feature lessens the chances of any password-related attacks.

3. OTPs are Difficult to Predict

Since OTPs come from complex algorithms, attackers won't be able to predict their sequence. The chances of an attacker’s success in OTP guessing are close to zero.

Without OTPs, you can easily be subject to online threats as soon as a hacker gets a hold of your actual password. OTPs secure your accounts, transactions, and other data through its unpredictability. 

Wrap Up

OTP is an effective security layer against unauthorized access and data breaches. 

By adding another authentication, any user can enjoy better security. An OTP ensures that only authorized users can access accounts and complete transactions. 

However, keep in mind that OTPs only offer partial protection. As a user, it is still your responsibility to be cautious with your accounts and passwords to avoid online attacks.


How long is OTP valid?

OTP codes are valid for a short time only. Depending on the limitations set by the app or site, an OTP is usually valid for 30 seconds to 5 minutes. 

Why can't I get my OTP code?

Some of the reasons you can’t get an OTP are network issues or incorrect data input. When generating an OTP, use a stable network connection and enter the correct code.

Why is OTP only 6 digit-numbers?

An OTP number with six digits is easier for users to remember while still being effective against attacks. It's also complex to guess, brute-force attacks, and other hacking techniques. 


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