When you create a new library the software will automatically create the file based database (SQLite) for you.
The file based database (SQLite) in not really meant to be used on a server. It can work, but there are some drawbacks. If you run into issues, please consider moving to a Postgres database instead.
Select the file base database and define the file location. Make sure to include the file name and the correct file extension (.db)
Example:
/mnt/server/library/.config/das-element.db