The Lightning Network is designed to solve Bitcoin's scalability issues by enabling off-chain transactions. This means that transactions can occur off the Bitcoin blockchain, allowing for faster and cheaper transactions. Users can open payment channels between each other, conducting transactions off-chain without the need to wait for block confirmations, reducing congestion on the network and allowing for microtransactions that were previously infeasible due to high fees. Once the off-chain transactions are complete, only the final state is recorded on the blockchain, conserving block space and improving efficiency.