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(And yes, you can use your iPhone to enter passwords on your Apple TV, but that requires dual-wielding your Apple TV remote and iPhone and feels a little more complicated than it needs to be.) ...
To do so, open the Settings app on the Apple TV, select General → Keyboard Layout, and choose Grid instead of Linear. The on-screen keyboard will then have a square layout by default.
If you've ever tried entering a complex password on your Apple TV, you know the pain. That default linear keyboard layout has you swiping endlessly left and right, hunting for characters like you ...
Apple announces M3-powered iPad Air with improved Magic Keyboard layout The base iPad also doubled its storage, is "6x faster" than some Android models.