Weird error for zfs storage backend

Hiya!

To increase the number of open files, you need to set this on a system level (perhaps in /etc/security/limits.conf) and not on a user level. You may run lxc from your user account, but the LXD hypervisor does not inherit your user account settings.

There is some discussion on this at Not able to set ulimit ( max open files) inside vms (but was not marked as solved, so you need to read it through).