How to maintain 2 versions of Photos library(storage optimised in Mac vs fully downloaded in HDD)

raven619claw wrote: … Wanted to know if switching primary libraries would work fine or could it cause loss of data?

Lots of folks have multiple Libraries, but you can't switch the connection to iCloud back and forth among them. If you connect a different Library to iCloud Photos, then all its images will be copied to iCloud Photos in iCloud.com, and then copied to all your connected devices. And then all the pictures in iCloud Photos will be copied to the newly connected Library. It could take days, and it wouldn't give you what you want. BAD. Don't swap libraries connected to iCloud!

What I and others do is maintain a Favorites Library that we designate as our System Library, and that Library is the only one connected to iCloud Photos. We have an Archive Library (I have several, really) that have all the pictures, including the Favorites. As we take new pictures with the iPhone, we copy those to the Archive, and delete all but the favorites from the System Library. Since I take pictures with my Nikon, for me they go into a separate Nikon Library, and I edit and curate them in their own Library. Then I copy the best ones to Favorites. To make Library management and copying between Libraries easier, we use the trusted 3rd party app PowerPhotos ($30).

You would simply maintain the library media on the external drive.

Move your Photos library to save space on your Mac - Apple Support

Or, create two libraries. One would sync to iCloud as your system library. The second would contain other photos that you wish not to sync.