I have developed a software piece (with C and Python) which I want to protect with dongle so that copying and reverse engineering becomes hard enough. My dongle device comes wit
Ironically, the thing you want to discourage is not piracy by users, but theft by vendors. The internet has become such a lawless place that vendors can steal and resell your software at will. You have legal recourse in some cases, and not in others.
Nothing is fool-proof, as previously stated. Also, the more complex your security is, the more likely it is to cause headaches or problems for legitimate users.
I'd say the most secure application is always the one tied closest to the server. Sadly, then users worry about it being spyware.
If you make a lot of different calls to your dongle, then maybe the cracker will just emulate your dongle -- or find a single point of failure (quite common to change one or two bytes and all your calls are useless). It is a no-win situation.
As the author of PECompact, I always tell customers that they can not rely on anything to protect their software -- as it can and will be cracked if a dedicated cracker goes after it. The harder you make it, the more of a challenge (fun) it is to them.
I personally use very minimal protection techniques on my software, knowing these facts.