I got an email saying I got a $5 gift code from Xbox rewards but I'm trying to redeem it

The Xbox Rewards program generally doesn't send codes. If it's from the Microsoft Rewards program, you would need to contact their customer support via their redemption page.

I got mine on Friday, it was messaged to me directly on xbox. Check your communication tab and go to the bottom where it says "Messages from Xbox Live". There was a message in there with a link to redeem a code, I was only rewarded a $5 gift card to Microsoft
even though it was supposed to be $10.

Well for one you cant redeem a discord code on a xbox its only a pc or mobile app

Follow the link in your email to redeem the code

The problem actually is, i can't redeem the Discord Nitro because it gets a ''Unknown Gift Code'' error (it's the code i got from the xbox), (trying on pc).

When I got this I bought it by redeeming Microsoft Reward points not by purchasing a gift card at a store, just to clarify. Also when I checked what it was for and it didn’t work. I used the code that was emailed to me.

If you have enough Microsoft reward points, then you need to redeem the reward points for Xbox/Microsoft Gift Cards on the redeem page of Microsoft rewards. Then once the gift card codes have been emailed to you, then you can redeem those gift card codes on https://account.microsoft.com/billing/redeem Once you have enough money from the Xbox Gift Cards, you can then purchase Minecraft from the Microsoft Store or Xbox Store (depending on which version you want).