Which volume to format to retain T1 touchbar functionality?

Which volume to format to retain T1 touchbar functionality?

I'm confused on which volume I should format to retain the firmware for the Touch Bar. In the FAQ it has the "Macintosh HD" item at the third level circled in red. Is that the one to format, or the one to avoid??

I don't know which volume contains the OS from this display.

Author: @JeffR47