[olefoo]

The client and the server have a shared secret that lets them generate a keystream based on the time.

[artursapek]

I don't think the Yubikey is able to generate TOTPs, unless all it is doing is passing the secret to the computer which is then generating them.

[fragmede]

Yubikey supports TOTP with OS driver help. Presumably the driver passes the time to the Yubikey to actually generate the TOTP.

https://www.yubico.com/products/yubikey-hardware/