Could a Network of Interconnected State Channels (E.g. Lightning Network) Support a Multilateral Derivatives Market?

While a network like the Lightning Network is excellent for payments, supporting a multilateral derivatives market is more complex. State channels are inherently bilateral.

A multilateral market could be simulated by creating a hub-and-spoke model, where all participants have a channel with a central hub, but this introduces centralization. A true peer-to-peer multilateral market would require more advanced channel constructions, like "channel factories," which can create a single state channel between a group of participants.

However, the complexity of managing state updates and collateral among many parties in a single channel remains a significant technical challenge.