An optical transceiver module is authenticated in a host system. A host generates a data string and writes the data string to a first predetermined memory location known to the transceiver. The data string is cryptographically altered (either encrypted or decrypted) by the transceiver and written to a second predetermined memory location known to the host. The host retrieves the cryptographically altered data string and performs a complementary cryptographic operation (either a decryption or encryption, respectively) thereon, creating a resulting data string. If the resulting data string is equal to the data string written to the first predetermined memory location, the transceiver is authenticated. The host and the transceiver may switch roles, with the transceiver generating the data string, the host cryptographically altering it, and so on. The host encrypts data strings when the transceiver decrypts data strings, and vice versa.