This article may help in providing further information.
https://discussions.apple.com/docs/DOC-250002657
This paragraph really says it all
- Syncing your devices. That is the primary purpose of iCloud Photos, to keep the Photos Library identical on all your devices. iCloud is keeping a copy of the current state of your Photos Library in iCloud as the master copy. When you modify your photos library on any device, it will be updated in iCloud and sync to all your devices. If you delete photos on your iPhone, the deletion will be updated in iCloud and on all other synced devices.
You are right that Photos maintains both the original file and the edited version. The benefit of iCloud Photos is that as soon as you make an edit on your Mac or take a photo on your phone; these photos are instantly sync'd and the edits copied across all of your devices. So you should always see the same edited version of your photo on all devices.
The same thing happens when you delete a photo on one of your devices, iCloud Photos will then delete the photo on all of your devices, just as it does with email and messages. This is good as it avoids you having to delete the photo multiple times. However, the photo is not completely deleted, it is moved to a 'recently deleted' folder or recycling bin for 30 days, after which it is permanently deleted.
For me, iCloud Photos fails the 'Backup service' test because all the devices are kept in sync at all times, there is no redundancy or separate copy of the photos, there is one live library and thats it. A few years back I lost the edits to 3,000 photos, there was no way I could retrieve these edits through iCloud Photos as no history is maintained, the only way I was able to recover these edits was through Time Machine which is a true backup service.
So, in summary, iCloud Photos is great, it does what it says it does, it means I can edit all my photos on the Mac and see the edited version on my phone and iPad without doing anything, but its important to also maintain backup copies in the event of problems.