Former Twitter CEO's New Project Revealed

Jack Dorsey, the former CEO of Twitter who was recently back in San Francisco looking for space for his new startup, might just be able to make something that makes money this time around.

The geeks at Engadget put two and two together to figure out that a portable credit card transaction system that's being tested in New York City is, in fact, Dorsey's new "stealth" startup.

The Square iPhone payment system involves a small dongle that plugs into an iPhone's headphone jack. Simply swipe a credit card, enter the amount, and let the customer sign with their finger, et voilá, you've paid for your homemade empanada from a vendor in Dolores Park.

Or you can pay for your iPhone with an iPhone. While Apple Stores have a mobile transaction system in place, it relies on Windows Mobile devices, and surely the image-conscious Steve Jobs would rather his "Genius" minions were carrying around company hardware.

The software even creates a receipt with the details of the transaction that includes a GPS location plotted on a map, so your wife knows exactly where you picked up the tab for dinner with your mistress.

And that's just one of the many security concerns -- handheld credit card swiping devices have been around for years, and sometimes used for nefarious purposes like collecting credit card numbers by frauds and identity thieves.

And with Dorsey suggesting that the hardware might be given away for free, with revenue coming instead on transaction fees, there should be plenty of these floating around for hackers to use and potentially abuse.

Photo by Joi Ito.

Jackson West figures what could possibly go wrong with any iPhone owner becoming a transaction processing machine.