RedHenry Security keys for U2F already exist and are widely used for years now? I have a Yubikey, they are nice
Can store passwords on the more fancier models, good for maybe something like a password manager
You can grab a Yubikey on Amazon.
How they work is based on different protocols, but FIDO2 uses a signature challenge.
Your yubikey has a private key, the service you are trying to login knows your public and associates it with your account.
When you login, it asks for a signature. If your Yubikey can generate one using the private key, you are authenticated. Otherwise, you aren't