Podman broken on Silverblue? Podman complains kernel not supporting overlay fs (backing file system is unsupported for this graph driver)

I get this error when I do anything with podman:

$ podman login …                   
ERRO[0000] User-selected graph driver "vfs" overwritten by graph driver "overlay" from database - delete libpod local files to resolve

When I tried workarounds, i.e. actually deleting libpod (I only moved it for backup reasons, ~/.local/share/containers), it now shows me an empty terminal for everything I do and does not exit. It is just blank.

I did not change anything and I also actually do not really want to delete all my containers. It should just work again…

BTW, I can see it re-creates the $HOME/.local/share/containers dir when I start it though. Actually, only one file is created though: $HOME/.local/share/containers/storage/libpod/bolt_state.db

Even podman info and podman version is broken now. Only podman -v works and returns podman version 2.1.1.

Full bug reports with a little more information:

Oh after a system upgrade and reboot, that included an update of podman:

podman 2:2.1.1-12.fc33 -> 2:2.2.1-1.fc33
podman-plugins 2:2.1.1-12.fc33 -> 2:2.2.1-1.fc33

I now get a slightly different error message:

$ podman version
ERRO[0000] 'overlay' is not supported over extfs at "/var/home/rugk/.local/share/containers/storage/overlay" 
Error: kernel does not support overlay fs: 'overlay' is not supported over extfs at "/var/home/rugk/.local/share/containers/storage/overlay": backing file system is unsupported for this graph driver

Note this still seems to be the default option.

Also funny, if I rerun this, I only get the error message (no ERRO[0000] is displayed anymore (which is useless anyway and I don’t even get what this tries to tell me TBH. Looks like the strange and useless error codes you know from Windows :stuck_out_tongue_winking_eye:):

$ podman version
Error: kernel does not support overlay fs: 'overlay' is not supported over extfs at "/var/home/rugk/.local/share/containers/storage/overlay": backing file system is unsupported for this graph driver

Changing the settings fixes that.
~/.config/containers/storage.conf needs to be like this:

[storage]
driver = "overlay"
[storage.options]
mount_program = "/usr/bin/fuse-overlayfs"

However, I still think the error messages were confusing and it should not have happened by default, so it’s a downstream (configuration?) issue.