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I am trying to create a filesystem in ZFS with the following command:

zfs create -o compression=on -o recordsize=1M -o encryption=on pool/dataset

I am unable to do so, since I receive the following error:

cannot create 'pool/dataset': Keyformat required for new encryption root.

There are 3 results for this in Google, none of them are particularly helpful. What am I doing wrong here?

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I met the same issue, and it worked when I specified the keyformat option.  Try this, for example:

zfs create -o compression=on -o recordsize=1M -o encryption=on -o keyformat=passphrase pool/dataset

Or any other supported format.

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