I can't seem to find an answer to this but apologies if this exists somewhere already.

From the last paragraph of section 2.0 in the lightning network paper version, "Micropayment channels create a relationship between two parties".

However the staked coins for the channel are held in a multisig address, and those addresses can have more than 2 signatures, max 20 signatures I believe, so can a lightning channel be set up that would be able to resemble more of a traffic circle than a 2 lane highway?

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Theoretically you are correct. However maintaining and operating the channel would become much more complex as everybody has to exchange signatures with everyone. Also the penalty case in case someone breaches the protocol is not clear. Unless we switch to eltoo channels as described in https://www.blockstream.com/eltoo.pdf I doubt that the lightning network will see multiparty channels.

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