The overlay
kernel filesystem cannot be used on top of zfs
.
That’s not a LXD limitation but a hard kernel one as the two filesystems are just incompatible.
For similar environments in the past, some have created a separate storage pool which is backed by something compatible with overlay
(dir
on top of ext4
is the most solid) and then assigned one storage volume per container, mounting that volume at /var/lib/docker
.