HOTP, OTP, and TOTP: Differences & how to choose

As an IT manager, ensuring the security of your company's sensitive data and applications is your top priority. One-time passwords (OTPs) have emerged as a popular method for enhancing login security, but with various acronyms and implementation options, it can be challenging to determine the best fit for your organization.

This article explores the key differences between HOTP, TOTP, and OTP and provides guidance on choosing the most suitable option for your unique needs.

What is HOTP?

HMAC-based One-time Password (HOTP) is an algorithm that generates unique, single-use passwords for user authentication. These passwords are typically 6-8 digits long and are valid for a single login attempt. The algorithm relies on a shared secret key and a counter value to generate the one-time passwords, providing a robust and secure authentication mechanism.

How does HOTP work?

To understand how HOTP works, let's break down the step-by-step process of generating and validating one-time passwords:

Step 1. The secret key is generated

The first step in the HOTP process is the generation of a unique secret key. This key is shared between the authentication server and the user's device, such as a hardware token or a mobile app. The secret key is never transmitted during the authentication process, ensuring its confidentiality and integrity.

Step 2. The HOTP combines the secret key and the counter value

Once the secret key is established, the HOTP algorithm combines it with a counter value. The counter value is a monotonically increasing integer that increments with each authentication attempt. This combination of the secret key and the counter value is then hashed using the HMAC-SHA-1 function, resulting in a unique code.

The HMAC-SHA-1 function is a cryptographic hash function that takes the secret key and the counter value as inputs and produces a fixed-size output. The use of this function ensures that the generated code is highly secure and resistant to tampering or reverse-engineering attempts.

Step 3. A 6-8 digit password is delivered to the user

After the HMAC-SHA-1 function generates the unique code, it is then truncated to create a 6-8 digits (or more) one-time password. This password is delivered to the user via various channels, such as a hardware token display, an SMS message, or a mobile app notification.

Step 4. The server validates the OTP in the system

When the user receives the one-time password, they enter it into the login form along with their username and password. The authentication server then performs the same HOTP calculation using the shared secret key and the expected counter value. If the server-generated code matches the user-provided code, the authentication is considered successful, and the user is granted access to the protected resource.

The server maintains a record of the counter value associated with each user, ensuring that the same one-time password cannot be used multiple times. If the user attempts to reuse a previously used password, the authentication will fail, protecting against replay attacks.

Benefits of HOTP

HOTP offers several benefits that make it an attractive choice for organizations looking to enhance their authentication security:

• Versatility: HOTP can be used to secure access to a wide range of resources, including digital applications, online services, and even physical locations, such as server rooms or restricted areas
• Resistance to threats: HOTP is resistant to eavesdropping, replay attacks, and brute-force attempts due to its dynamic nature and the use of a secret key.
• Adaptability: HOTP can function offline or in environments with intermittent network connectivity, as it relies on a counter value rather than a timestamp.

Disadvantages of HOTP

While HOTP provides robust security, it also has some disadvantages that organizations should consider:

• Phishing risk:  Like any authentication method that relies on user input, HOTP is susceptible to phishing attacks. If a user is tricked into revealing their one-time password to an attacker, the attacker may be able to use it to gain unauthorized access to the user's account.
• Resynchronization issues: HOTP relies on the synchronization of the counter value between the user's device and the authentication server. If the counter value becomes out of sync, which can happen if the user generates too many unused codes or if the server's counter is not updated correctly, the authentication process will fail. 
• Device dependence: If the user loses or misplaces the device generating the HOTP, they may be unable to access the required resources until a replacement is provided.

What is OTP?

One-time Password (OTP) is an umbrella term that encompasses various methods for generating unique, single-use passwords. OTPs are designed to be valid for only one authentication attempt, providing an additional layer of security compared to traditional static passwords. By generating a new password for each login attempt, OTPs significantly reduce the risk of unauthorized access, even if a password is intercepted or compromised.

How does OTP work?

OTPs can be delivered to users through various channels, such as:

• SMS messages: Authentication system sends a unique OTP to the user's registered mobile number. While convenient, this method is more vulnerable to interception through SIM swapping attacks or SS7 network vulnerabilities.
• Mobile apps: Dedicated apps like Google Authenticator or Microsoft Authenticator generate OTPs using HOTP or TOTP algorithms. This method offers enhanced security since codes are generated locally and never transmitted over networks, making them resistant to interception.
• Hardware tokens: Physical devices (key fobs, smart cards, USB devices) display OTPs on a small screen when a button is pressed or the token is inserted into a reader. These provide excellent security through dedicated hardware but may be costly to deploy and can be lost or damaged.
• Email: Authentication system sends OTPs to the user's registered email address. While widely accessible, this method's security depends heavily on the email account's protection and can be compromised if the email account is breached.

Regardless of the delivery method, the user enters their username, password, and the provided OTP to verify their identity. The system validates the OTP and grants access only if it is correct and within the valid timeframe.

Benefits of OTP

OTP offers several benefits that make it an effective authentication method:

• Versatile delivery methods: OTPs can be delivered through multiple channels, allowing organizations to choose the most convenient and suitable method for their users. 
• Protection against replay attacks: Since OTPs are valid for a single use, intercepted passwords cannot be reused for subsequent authentication attempts. 
• Improved user trust: Implementing OTPs demonstrates a commitment to security, enhancing user trust in the application or website.

Disadvantages of OTP

Despite its benefits, OTP also has some disadvantages that organizations should be aware of:

• Internet access dependence: Some OTP delivery methods, such as mobile apps, require an active internet connection, which may not always be available.
• Implementation costs: Deploying OTP systems can involve additional costs, particularly if hardware tokens are used. Organizations need to consider the cost of purchasing, distributing, and managing hardware tokens for their users. 
• Phishing vulnerability: Although OTPs provide an extra layer of security, users may still fall victim to phishing attempts. Attackers may create fake login pages or send fraudulent emails asking users to enter their OTPs. If users are not cautious and enter their OTPs on these malicious sites, attackers can capture and use the OTPs to gain unauthorized access. 

What is TOTP?

Time-based One-time Password (TOTP) is an algorithm that generates unique one-time passwords based on a shared secret key and the current time. TOTP is an extension of the HOTP algorithm, with the main difference being the use of time as the input instead of a counter value. TOTP passwords are typically valid for a short time window, such as 30 seconds, after which a new password is generated. 

Since TOTP relies on timestamps, both the server and user's device must have reasonably synchronized clocks—if they're too far out of sync (typically more than a minute), authentication attempts will fail and the user may need to adjust their device's time settings.

How does TOTP work?

TOTP works similarly to HOTP, but instead of using a counter value, it uses the current time as an input. The algorithm follows these steps:

1. A shared secret key is generated and securely stored on both the server and the user's device.
2. When a user attempts to authenticate, the TOTP algorithm on their device calculates the current one-time password using the secret key and the current time.
3. The user enters the generated TOTP along with their username and password.
4. The server performs the same TOTP calculation and compares the result with the user-provided password. If they match and the password is within the valid time window, the authentication is successful.

The use of time-based passwords adds an extra layer of security to the authentication process. Even if an attacker manages to intercept a TOTP, it will only be valid for a short period, typically 30 seconds. After that, the password expires, and a new one is generated, rendering the intercepted password useless.

Benefits of TOTP

TOTP offers several benefits that make it a popular choice for organizations implementing multi-factor authentication:

• Wide support: Many popular authentication apps  support TOTP, making it easy for users to adopt.
• Minimal infrastructure cost: TOTP can be implemented using software tokens, reducing the need for expensive hardware tokens. Users can install authentication apps on their smartphones, which generates TOTPs based on the shared secret key.
• Enhanced security: The short validity period of TOTP passwords adds an extra layer of security, as intercepted passwords quickly become useless.

Disadvantages of TOTP

While TOTP provides robust security, it also has some limitations that organizations should consider:

• Time synchronization dependence: TOTP relies on accurate time synchronization between the server and the user's device. If the device's clock is not synchronized, authentication may fail.
• Limited offline usability: TOTP may not be suitable for environments with limited or no internet connectivity, as it requires access to an accurate time source.
• Device dependence: Similar to HOTP, users must have access to the device generating the TOTP to authenticate successfully.

To better understand the distinctions between HOTP, TOTP, and OTP, let's explore their key differences:

1. Synchronization

• HOTP uses a counter value that increments with each authentication attempt.
• TOTP relies on time synchronization between the server and the user's device.
• OTP is a broad term that can encompass both counter-based and time-based algorithms.

2. Expiration

• HOTP passwords do not have an inherent expiration time and remain valid until the counter value is incremented.
• TOTP passwords are valid for a short time window, typically 30 seconds, after which a new password is generated.
• OTP expiration depends on the specific implementation, which can be either counter-based or time-based.

3. Security risks

• HOTP and TOTP are resistant to eavesdropping and replay attacks due to their dynamic nature and the use of a shared secret key.
• OTP security depends on the specific algorithm used (HOTP, TOTP, or others) and the delivery method (SMS, mobile app, hardware token, etc.).

4. Generation method

• HOTP generates passwords based on a secret key and a counter value.
• TOTP generates passwords based on a secret key and the current time.
• OTP generation can use various methods, including HOTP, TOTP, and other proprietary algorithms.

5. Offline usability

• HOTP can be used in offline environments or when network connectivity is intermittent, as it relies on a counter value.
• TOTP requires access to an accurate time source, which may limit its usability in offline scenarios.
• OTP offline usability depends on the specific implementation and delivery method.

How to choose between HOTP, TOTP, and OTP

When selecting an OTP type for your business, consider the following best practices:

1. Evaluate user experience

Assess your users' technical proficiency and the devices they commonly use. Choose an OTP type that is easy to adopt and does not create unnecessary friction in the authentication process.

2. Consider infrastructure capabilities

Evaluate your organization's existing infrastructure and its ability to support different OTP types. For example, if your systems have limited Internet connectivity, HOTP may be more suitable than TOTP.

3. Evaluate compliance and regulatory requirements

Certain industries, such as finance and healthcare, have strict security regulations. Ensure that the chosen OTP type meets the required compliance standards and provides the necessary level of protection for sensitive data.

4. Balance security and usability

Consider the balance between security and usability when choosing an OTP type. While some methods may offer higher security, they may also be less user-friendly. Strike a balance that meets your organization's security needs without compromising user experience.

Rippling: Enhanced access security for your business

Rippling is a comprehensive workforce management platform that offers robust identity and access management features. With Rippling, businesses can seamlessly implement and manage OTP-based authentication across their applications and services.

Rippling's identity and access management solution provides:

• Customizable password complexity requirements and policies
• Multi-factor authentication supporting OTP, Duo, and Yubikey
• Configurable security settings for session and inactivity timeouts
• Centralized user provisioning and deprovisioning
• Granular access controls based on user roles and permissions
• Secure single sign-on (SSO) for streamlined access
• Detailed audit logs and compliance reporting

By leveraging Rippling's platform, IT managers can enforce strong authentication practices and ensure secure access to critical resources while minimizing administrative overhead.

HOTP vs OTP vs TOTP FAQs

What are the main challenges of using HOTP?

The main challenges of using HOTP include the potential for desynchronization between the counter values on the server and the user's device, as well as the need to securely manage and distribute the shared secret keys.

What happens if the HOTP counter gets out of sync?

If the HOTP counter becomes desynchronized, authentication attempts may fail. To resolve this issue, the system administrator may need to reset the counter value on the server and the user's device.

What devices can use HOTP?

HOTP can be implemented using various devices, including hardware tokens, mobile apps, and SMS-based systems. The choice of device depends on the organization's security requirements and user preferences.

This blog is based on information available to Rippling as of November 20, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.