Backup to ICloud

128GB would be the storage on your iPhone, not on iCloud.

See: What's the difference between device storage and iCloud storage? - Apple Support

To see how much iCloud storage you have, see: Manage your iCloud storage - Apple Support

If you want to obtain more iCloud storage, see:

iCloud+ plans and pricing - Apple Support

and

Upgrade to iCloud+ - Apple Support

I just got off the phone with Apple's support team. I had a similar problem where my iCloud wouldn't back up. They had me delete all backups and nearly everything I had on the iCloud off of it and it still wouldn't back up. We tried a few more things and then after an few hours I finally got an answer!

The answer I was given in the end is that although they give you 5 GB's of free storage on iClould, the process of doing the backup takes up about 4.5 GB of random background things that just allow the backup to work. So you really have only around 0.5 GB of usable storage on iCloud for free.