How do netbank login dongles work?

Question

This is a question purely to satisfy my own curiosity.

Here in Norway it's common for netbanks to use a calculator-like (physical) dongle that all account holders have. You type your personal pin in the dongle and it generates an eight-digit code you can use to login online. The device itself is not connected to the net.

Anyone knows how this system works?

My best guess is that each dongle has a pregenerated sequence of numbers stored. So the login process will fail if you type an already used number or a number that is too far into the future. It probably also relies on an internal clock to generate the numbers. So far none of my programmer peers have been able to answer this question.

[Edit]

In particular I'm curious about how it's done here in Norway.

Answer 1

Take a look here: http://en.wikipedia.org/wiki/Security_token. If you are interested in the algorithms, these might be interesting: http://en.wikipedia.org/wiki/Hash_chain and http://en.wikipedia.org/wiki/HMAC.

Answer 2

TOKENs have very accurate real-time clock, and it is synced with same clock on the auth server. Real time is used as a seed along with your private key and your unique number is generated and verified on the server, that has all the required data.