Unknown 'Update' folder in Sidebar

The Update Volume is a remnant of the macOS Big Sur Disk/ Volume structure

which points to you not erasing your macs Disk properly when you downgraded to macOS Mojave.

Can we check on how you erased the Disk.

To erase the Disk properly you need to boot to the USB installer you created

and select Disk Utility.

Click on View in the menubar and select Show All Devices.

This would have now revealed the Volume structure of your Disk.

You highlight the Disk called Apple SSD.... or similar.

And click on Erase.

Give the Disk a name.

Format: APFS.

Scheme: GUID Partition Map.

Click Erase.

When Done quit Disk Utility.

Click on Install OS and press Continue.

The installation procedure should start follow the prompts.

Within Disk Utility you will need to click "View" and select "Show All Devices" so that the physical drive and the hidden Container appears on the left pane of Disk Utility. This should also allow you to see the "Update" volume so you can delete it.

As @Eau Rouge already mentioned the "Update" volume is only used by macOS Big Sur so it is safe to remove it when you are only booting to macOS 10.15 or earlier.

There is a possibility you could do that from Disk Utility, but I am not entirely sure.

You might have to do it from the Partition section to gain the space back.

Let's see if someone else joins in and can give some other advice.

Otherwise the safest approach would be to erase and reinstall.