What is the Lightning Network?

The Lightning Network is a second-layer scaling solution designed to improve the speed and efficiency of Bitcoin transactions. It operates on top of the Bitcoin blockchain, allowing for near-instant transactions and significantly lower fees compared to making transactions directly on the blockchain. This is achieved by creating off-chain payment channels between users, which can facilitate multiple transactions without recording each one on the blockchain until the channels are closed.

This design mitigates congestion on the Bitcoin network, making it particularly useful for small or frequent transactions, and enhances Bitcoin's capacity to handle a larger volume of transactions in a way that remains economically viable. As such, this layer provides the essential functionality necessary for the scalability of Bitcoin, which is crucial for its adoption in everyday commerce.

The other options describe concepts that are not fit for the Lightning Network. For example, while facilitating cryptocurrency exchanges is an important part of the cryptocurrency ecosystem, it is not the primary function of the Lightning Network. Similarly, there is no governance framework established explicitly by the Lightning Network itself; Bitcoin's governance operates through community consensus and protocol upgrades. Lastly, although encryption is fundamental to Bitcoin's security, the method of encrypting transactions is not the purpose of the Lightning Network. The focus of the Lightning Network is purely on enabling faster