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So in this case, arent the two factors a) physical possession of desktop/laptop and b) the Yubikey ? How likely is it you'll lose both if you keep your keyring with you?

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Not sure reading the article why would I need the computer. The way I read it, you enter the key to any computer and it logs in to the account of the key owner. Am I wrong?

FTA: "Organizations will soon have the option to enable employees and customers to sign in to an Azure AD joined device with no password, by simply using a Security Key to get single sign-on to all Azure AD based applications and services."

Emphasis added. Device needs to be paired with Company's AD first.

I also imagine that there are options for making e.g. the device unlock only require yubikey, but login to SSO require 2nd factor.

You can pair new devices with a company's active directory.

The two factors are a) the YubiKey and b) the PIN for the YubiKey.

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