Dongles are generally understood to be more secure than TOTP because they have to be physically stolen (unlike TOTP seeds, which are just information). Google is giving away thousands of physical keys maybe to drum up goodwill among the python community, maybe because it's a trivial expense for them and they have an institutional interest is seeing PyPI succeed. I dunno, but it doesn't really seem all that sinister.

Just FYI, you don't need a smartphone to use TOTP. You can download 'pyotp' from PyPI and use it with any python interpreter. Anybody publishing packages to PyPI would have access to that.