You also have the option of putting the Photos Library on an external drive. The drive would need to be formatted in either APFS format or Mac OS Extended (Journaled) format. The drive must be connected directly to the Mac by cable, not networked, clouded, NASed, etc. Additionally, the drive can not have had Time Machine on it since it was formatted. There have been so many problems with using incompatible drives that the newest macOSs won't even allow a Library on a non-Mac formatted drive to open, since there is a chance of damaging the Photos database. See this:
Move your Photos library to save space on your Mac
Especially on a portable computer, the System Library should be kept on the internal drive, if you can.
I import my Old Family Pictures and my new Nikon pictures to Photos Libraries that are not the System Library. I edit, rate, and organize the pictures there, picking the best ones to transfer to my System Library of favorites. That Library can be small enough to remain on my internal drive. I also have several Libraries for archiving pictures. I and most experienced Photos folks, use the trusted 3rd party app PowerPhotos ($40) to handle multiple Libraries, copying stuff between Libraries while maintaining album and folder organization.
As the article on iCloud Photos says, you can't think of iCloud as a backup, because mistakes are backed up, too. So with iCloud, you can't go "back up" to an earlier date before the mistake. However, iCloud works as a limited off-site backup against a disaster that wipes out your local hard drive backups.
Photos Libraries can never be used from iCloud Drive, or even transferred there. However, if you make a dmg file of the Library (with Disk Utility,) or if you remove the ".photoslibrary" extension from the Library package, then that can be stored in iCloud.