Comment 1 for bug 1574363

Docker is supposed to always be using aufs inside LXD containers, the output above suggests it's not the case.

btrfs doesn't allow for unprivileged btrfs subvolume delete by default, only subvolume creation (yes, that's a bit odd). So the failure you're getting is absolutely normal except for the fact that I was told Docker would always do aufs inside unprivileged LXD containers.

As a workaround to keep having docker do btrfs inside LXD, you may want to change the host btrfs mountpoint to have user_subvol_rm_allowed as a mount option, then restart the LXD container and it should be able to both create and delete subvolumes.

Note that a bunch more btrfs functions will still fail in the container, so it'll likely only make things slightly better for you.