yahoo uses 'Authentication Method- OAuth2' for both Sending and receiving. So if you have switched on 2 step verification in yahoo webmail - then switch it off.

Account Settings would need to have Authentication Method set to 'OAuth2' for incoming and the Outgoing SMTP server settings. User name would be full email address.

You need enable cookies in Thunderbird. Settings > Privacy & Security select 'Accept cookies from sites'

Then scroll to 'Passwords' and clear all the saved passwords.

Exit Thunderbird wait a few moments for background processes to complete and then restart Thunderbird.

This time you should get a prompt from yahoo to sign in as normal - this is yahoo checking you really are you - you do it to allow Thunderbird access to server.

If the above proves to be pain in the proverbial:

You can still use 'Authenication Method' - 'Normal Password' for incoming and outgoing. However - you must logon to webmail account and switch on 2 step verification and then create an app specific password.

In Thunderbird - access the saved passwords Settings > Privacy & Security Click on Saved Passwords Click on Show Passwords Right click on incoming imap:// line and select 'Edit PAssword' completely remove all contents and then enter the 'app specific password' Do the same for the 'smtp://yahoo account line. Once passwords are all updated, click on Close Then restart Thunderbird.