SHORE CRYPTO PRICING AND ALLOCATION ENGINE

_______________

A Capstone Proposal

Presented to the

Faculty of CST 499 at

California State University, Monterey Bay

_______________

In Partial Fulfillment

of the Requirements for the Degree

Bachelor of Science

in

Computer Science

_______________

by

Holly Stephens

Fall 2021
Copyright © 2021
by
Holly Stephens
All Rights Reserved
 EXECUTIVE SUMMARY OF PROPOSAL
Shore Crypto Pricing and Allocation Engine
by
Holly Stephens
Bachelor of Science in Computer Science
California State University Monterey Bay, 2021

Shore Crypto is a startup company aiming to insure smart contracts on blockchain

technology. The purpose of this project is to provide Shore Crypto with a prototype of a tool

which will enable the company to simulate the impact that changes in certain financial variables-

such as the price of insurance premiums or the interest rates offered to investors- will have on its

insurance risk pools. This will be implemented through a web application created exclusively for

Shore Crypto’s use. The population affected by this project is comprised of investors in Shore

Crypto and clients of Shore Crypto. The anticipated outcomes of this project are that Shore

Crypto will be empowered to be more competitive in both the prices it sets for its clients, as well

as the interest rates that it offers to its investors, and lastly an optimization of the growth of

Shore Crypto’s insurance risk pools.

 TABLE OF CONTENTS

EXECUTIVE SUMMARY OF PROPOSAL..........................................................................................................III

TABLE OF CONTENTS...........................................................................................................................................IV

LIST OF FIGURES.....................................................................................................................................................V

PART I...........................................................................................................................................................................1

BACKGROUND AND APPROACH.......................................................................................................................1

INTRODUCTION.................................................................................................................................................1
PROJECT GOALS AND OBJECTIVES.............................................................................................................4
ENVIRONMENTAL SCAN.................................................................................................................................5
STAKEHOLDERS AND COMMUNITY............................................................................................................6
APPROACH AND METHODOLOGY................................................................................................................7

PART II..........................................................................................................................................................................8

ETHICAL AND LEGAL CONSIDERATIONS.......................................................................................................8

ETHICAL CONSIDERATIONS..........................................................................................................................8
LEGAL CONSIDERATIONS..............................................................................................................................8

PART III......................................................................................................................................................................10

PROJECT AND SCOPE..........................................................................................................................................10

TIMELINE AND BUDGET...............................................................................................................................10
MILESTONES....................................................................................................................................................11
RESOURCES NEEDED.....................................................................................................................................12
RISKS AND DEPENDENCIES.........................................................................................................................12
FINAL DELIVERABLES..................................................................................................................................13
USABILITY TESTING AND EVALUATION.................................................................................................13
REFERENCES.........................................................................................................................................................14
 LIST OF FIGURES

FIGURE 1. PROJECT TIMELINE.......................................................................................................................................10

FIGURE 2. PROJECT TRELLO BOARD.............................................................................................................................11
FIGURE 3. PROJECT MILESTONES..................................................................................................................................12
 PART I
BACKGROUND AND APPROACH

INTRODUCTION

PROJECT NAME AND DESCRIPTION

The business of insurance is one as old as civilization itself. Over the millennia, the goal

has remained the same: to pool risk from individuals and redistribute it across a larger portfolio.

Like any business, success is largely defined by the ability to collect an economic profit. To

achieve this, any entity selling insurance must set premiums and assume risk in a way that is

auspiciously calculated. Technology has been a boon to market expansion and has made

insurance an even more ubiquitous practice. This expansion and increase in connectivity has

escalated competition across all markets, which in turn, has compounded the necessity for any

given business to find innovative ways to set themselves apart. For those in the insurance sector,

they now must make their aforementioned calculations with more precision and edge than ever

before.

Shore Crypto’s Pricing and Allocation Engine will be a tool to provide additional insight

into making such calculations. It will be a web application that is designed exclusively for a

startup insurance company called Shore Crypto and will provide an interactive simulation

experience for the company and allow it to better hypothesize how any number of its insurance

risk pools will react when adjustments are made to various inputs and outputs. These inputs and

outputs will include things like investments, premiums, interest rate payouts, and insurance

claims. These simulations will be stored for later reference and manipulation, so that Shore

Crypto will have a way of comparing and contrasting different scenarios. This will help the
company to better assess if the interest rates they are offering on investments or premiums they

are charging their clients are competitive enough and are ultimately profitable for the company.

It will also aid the company in understanding what interest rates and premiums are best suited for

their targeted market.

ISSUE: DATA SIMULATION AND INTERACTION

In recent years, data analytics has become an increasingly popular, powerful, and

necessary tool found in nearly every company’s arsenal. The global spending on big data

analytics topped 180 billion USD in 2019 alone (Research and Markets, 2020). In order to give

themselves a competitive edge, companies in their nascent stages are now looking for ways to

leverage data analytics. In this search, one can find a plethora of tools on the market, such as

Tableau and Microsoft Power BI, which offer robust platforms for data reporting, visualization

and analytics, and other tools such as Simcad Pro, which provide users with interactive

simulation modeling environments. While these tools are designed to be highly customizable and

relatively easy to use, they can also add complexity and overhead when attempts to fit them to

very particular end user experiences are made. Companies like Shore Crypto seeking to use

interactive data simulations with a certain level of granularity, and with very particular ends in

mind, may end up spending more time and money than they need to, using a number of these

tools in orchestration to achieve their goals, while ultimately compromising on the end user

experience they had envisioned.

SOLUTION: PRICING AND ALLOCATION ENGINE

Rather than creating a broad and highly customizable user experience to cater to all

industries, this project will focus on a highly targeted audience within the insurance industry

(Shore Crypto). In creating a tool designed specifically to enable its users to simulate and

analyze their insurance risk pool data, this project will solve the issues of cost, time, and

compromise that arise in trying to tailor a universal design principle to very specific needs.

EVIDENCE OF NEED

There is currently nothing on the data visualization or simulation markets that enables

insurance risk pool simulation out of the box, which is the focal issue Shore Crypto is currently

facing. This project is needed because it will provide Shore Crypto with the data visualization

and simulation experience it has thus far been unable to obtain. The pricing and allocation engine

will easily allow the company to simulate the effect various inputs and outputs have on its

insurance risk pools, thereby empowering Shore Crypto to make more competitive and

successful financial decisions. It will help to drive the key financial decisions that Shore Crypto

will make in the future, as it will aid the company in deciding the pricing of its premiums and

interest rates on investments. Raising or lowering these prices at the proper time is inextricably

linked to the success of the company.

 PROJECT GOALS AND OBJECTIVES

GOALS

● Enable Shore Crypto to simulate its insurance risk pool

● Enable Shore Crypto to visualize the input and output variables responsible for the gains

and losses of said risk pool

● Enable Shore Crypto to simulate the effect various inputs and outputs has on its risk pool

● Minimize the amount of time Shore Crypto spends on the interpretation of their insurance

risk pool data

● Empower Shore Crypto to make more informed financial decisions

OBJECTIVES

● Create a Node.js app that is hosted on Heroku

● Create a MySQL database that has a user table and a simulation table

● Establish an interface for creating a simulation and adding it to the database

● Establish an interface for editing a simulation and updating it in the database

● Establish an interface for running a simulation based on the variables stored in the

database

● Create an interface for selecting to perform any of the aforementioned items

● Create authenticated user sessions

 ENVIRONMENTAL SCAN

There are a number of tools and applications that exist to aid users with the visualization

of their data. For instance, Microsoft Power BI, Google Data Studio, and Tableau all provide

users with visualization and data analytics capabilities. The important distinction between these

tools and Shore Crypto’s Pricing and Allocation Engine is that the latter will provide insurance

risk pool visualization and simulation out of the box.

Microsoft Power BI is particularly noteworthy because of just how customizable and

interactive it is. A user can “use developer tools to create custom Power BI visuals” (Microsoft,

2021). With a Power BI account, VS Code, and a command line, a user can design visuals that

they can import into their Power BI environment. While this kind of customization is incredibly

robust, Shore Crypto requires a more focused simulation experience that goes beyond what

Power BI provides out of the box. For instance, Shore Crypto could use Power BI to create a

custom Power BI visual of an insurance risk pool, however, also needing dynamic input and

output components to be added and removed from this visualization at will, there would be an

impasse. Power BI does not yet support this level of interactivity, which is the essence of what

Shore Crypto is seeking.

While this project will lack much of the broad scope and back-end customization that

Microsoft Power BI offers, it will support a highly specific network of variables and simulate

how they interact with one another.

 STAKEHOLDERS AND COMMUNITY

As previously mentioned, Shore Crypto is an insurance company specifically aiming to

insure smart contracts on blockchain. With this in mind, the stakeholders of this project can be

identified as Shore Crypto, individuals or entities that invest in Shore Crypto, and individuals or

entities that purchase insurance from Shore Crypto. The communities that define these groups

are the finance and cryptocurrency communities. If adopted, this project would directly impact

the success of Shore Crypto because it would likely play a critical role in deciding interest

payout rates made to investors and insurance premiums for customers. This is because the

project would provide simulation capabilities for the company to better assess how its risk

pool(s) are affected by different premium and interest payout rates. Having a tool to compare

hypotheticals, Shore Crypto could then offer optimally competitive rates. Given this outcome,

the project would also affect investors and clients because of its involvement in financial factors

that are directly linked to these parties. Ideally, this scenario would be auspicious for all parties

involved. If leveraged correctly, investors would see satisfactory returns and would continue to

keep their currency invested in Shore Crypto. Those buying insurance from Shore Crypto would

deem the cost of insurance well worth the mitigated financial risk in using smart contracts. Shore

Crypto would benefit from this three-way symbiotic relationship as well. Another possible

outcome is that smart contracts would become more ubiquitous and established in mainstream

corporate finance, because of this aforementioned mitigation of risk.

APPROACH AND METHODOLOGY

This project will be designed as a Node.js web application using an Express framework

and a MySQL database. Node.js was selected for this project for its high performance,
scalability, and adaptability. The primary goal of this project is to enable risk pool simulation,

which can be achieved with the foregoing. The secondary goal, perhaps out of the scope of this

project, is providing complementary visualization capabilities. Requirements gathering for

which tool might be best suited for the latter job is ongoing. Possibilities include JavaScript data

visualization libraries like D3, however this has a reputation of having a steep learning curve and

may not be the best choice for this project’s timeline. Other options still being considered are

Jupyter Notebook and Tableau.

As this project is intended to produce a proprietary product, there will be a default

administrator account that will be handed over to the CEO of Shore Crypto. This account will

handle user administration, should the user base for this project grow. The administrator account

will be able to create new accounts and delegate read or write access to them. Accounts with read

access will only be able to view simulations, while accounts with write access will be able to

view and modify all simulations but will not be able to create new accounts and delegate access.

Several interviews have already been conducted with the CEO of Shore Crypto to discuss

scope and requirements. This project will use a Behavior Driven Development methodology and

Trello for task tracking. Once a development timeline is established, touch points and testing will

be scheduled with the CEO of Shore Crypto to ensure things remain on the proper track.
 PART II
ETHICAL AND LEGAL CONSIDERATIONS

ETHICAL CONSIDERATIONS

With the development of any new project, it is important to diligently survey the ethical

landscape it will tread upon. The immediate thing that comes to mind is pricing. This project's

main goal is to help Shore Crypto set pricing for its insurance and interest rates. While the idea is

that this project would be a tool used to elucidate the price points that are beneficial for all

parties involved, it could be used to set price points that are heavily skewed towards the benefit

of Shore Crypto at the expense of the investors and clients. Moreover, because this company is

aiming to be the first to market, there will be virtually no alternatives, making this concern more

salient. That being said, it could also be argued that entering the market with price gouging

tactics would benefit no one, and this would be an unlikely and inauspicious pursuit. These types

of concerns are by no means unique to Shore Crypto. Conversely, they come with the territory of

the insurance industry. I don’t believe there is anything that can be done within the scope of this

project to help mitigate these concerns. That being said, if the project is adopted and further

developed at Shore Crypto, I think it would be worth considering developing a service that could

help its users assess economic health holistically and provide forecasting capabilities for the

impact various simulations might have on the broader economy.

LEGAL CONSIDERATIONS

Being that this project is a new tool designed for a new company, legal issues of patents

are worth considering. This, however, pales in comparison to the litany of legal considerations
that are concomitant with insurance agencies. That being said, this project is not intended to have

any involvement in policy making or the handling of claims. It is merely designed to help Shore

Crypto determine optimal price points. Because it is intended to be strictly an internal tool for the

company, it is likely to be exempt from any considerable legal hurdles.

 PART III
PROJECT AND SCOPE

TIMELINE AND BUDGET

The timeline for this project is based upon an agile development methodology and will

use behavior driven development. Each sprint will last one week and will be based upon one or

more user stories. There are two planned meetings with the client which are intended for review

and feedback during the development process. This will help to keep the project aligned with the

goals of all parties involved. The final deliverable of this project will be a prototype of a tool

intended for exclusive internal use. For the scope of this Capstone, there is no expected cost that

this project will incur.

Figure 1. Project Timeline.

To keep deadlines and reviews in order, a Trello board is being used to track user stories,

the more granular development requirements, as well as meetings. A link to this board can be

found at: https://trello.com/b/9KL5JhNh/shore-crypto-pricing-allocation-engine

Figure 2. Project Trello Board.

MILESTONES

The milestones for this project are outlined in figure 3. There are three major

development stages that categorize the user stories. The first development stage follows the

initial requirements gathering and will focus on the core functionality of the project, that is the

logic behind creating, running, and editing risk pool simulations. These stages are set to be

completed in the first three weeks of the semester. Once these stages are complete, there will be

a meeting with the client for review and feedback. After feedback is provided, the front end and

UI pages will be fleshed out, followed by authentication in the fifth and sixth weeks. After all of

these major stages are completed, there will be a final review with the client for user acceptance

testing and any final remediation will be performed at this point.

Figure 3. Project Milestones.

RESOURCES NEEDED

The resources needed for this project are a laptop and access to the internet. Applications

and software used for development will include Heroku, MySQL Workbench, Eclipse, and

GitHub.

RISKS AND DEPENDENCIES

Risks that could affect the completion of this project are the complexity of the desired

functionality coupled with the team size of this project. The logic behind implementing a

simulation is complex. Adding visualizations on top of this is a tall order, which is why I’ve

shifted the focus of the project from a predominantly visual deliverable to a functional one which

focuses on generating simulation output. This is also a solo project, which adds a considerable

workload to each sprint. The most salient tasks of this project are creating, modifying, viewing,
and running simulations. All of these are dependent upon the first of the aforementioned; the

ability to successfully add simulations to the database. That is why this task is the centerpiece of

the first sprint.

FINAL DELIVERABLES

The final deliverable of this project will be a web application hosted on Heroku and

sourced from a private repository on GitHub. Shore Crypto will have exclusive rights to access

and use. The client will be able to log in, create, view, edit, and run simulations. They will also

be able to add and manage user accounts. The final review of this deliverable will include a live

demonstration and will be recorded for later reference. Documentation will be provided that

provides an overview of the final product, its current features, as well as features that were

deemed beyond the scope of this Capstone with accompanying notes on how these might be

implemented later on.

USABILITY TESTING AND EVALUATION

This project will be tested continuously throughout the development stages by the

developer. There will be two meetings scheduled with the client for testing as well. The first of

these will be held once all tasks involving the logic pertaining to simulations have been

completed. The second will be held in the final stage of development for end-to-end testing and

user acceptance testing. Client testing for this project will involve presenting the prototype either

via screen sharing or in person. Once the project has been demonstrated and reviewed,

credentials will be provided to the client so that they can perform more thorough user acceptance

testing at their leisure.

 REFERENCES

Microsoft Documentation. (2021).

https://docs.microsoft.com/en-us/power-bi/developer/visuals/develop-circle-card

Research and Markets. (2020, January).

Global Big Data Analytics Market Size, Market Share, Application Analysis, Regional

Outlook, Growth Trends, Key Players, Competitive Strategies and Forecasts, 2019 To

2027.

https://www.researchandmarkets.com/reports/4992328/global-big-data-analytics-market-

size-market?

utm_source=dynamic&utm_medium=GNOM&utm_code=jjrj62&utm_campaign=13593

21+-+Big+Data+Analytics+Industry+Report+2020+-+Rapidly+Increasing+Volume+

%26+Complexity+of+Data%2c+Cloud-Computing+Traffic

%2c+and+Adoption+of+IoT+%26+AI+are+Driving+Growth&utm_exec=joca220gnomd