How do you set up a Terraform backend?

To set up a Terraform backend, you define a backend configuration block in your Terraform configuration. This configuration block specifies the backend type (such as S3, Azure Blob Storage, etc.) and any necessary settings to connect to that backend.

Using a backend is essential because it dictates how Terraform stores its state files and handles locking, which is crucial in team environments to prevent concurrent operations from corrupting the state. The backend can also allow you to manage state files more effectively by leveraging remote storage solutions that provide durability and access control.

Creating an environment variable might affect the configuration, but it does not establish the backend itself. Updating the Terraform CLI settings does not provide a systematic way to configure the backend across different projects or teams, and installing additional plugins is typically unnecessary for using most built-in backends since they come pre-packaged with Terraform. Thus, defining a backend configuration block within the Terraform configuration is the correct and standard approach to set up a backend.