Can someone please explain to me what I am doing wrong? (and give me general tips about Dragon Fight).

yup its normal, try to be as 2 blocks far of the crystal

Thank you, so I should build back two blocks?

oof prob try to attack from more far and with sufficent protection, and yeah also some block(s) back of you to dont get knockbacked also should be nice

What you did was fine. You should not have died from that. My guess is that on the frame you hit the crystal, the dragon destroyed the wood block, removing your defenses. That's the only explanation I can think of, as you did everything else correct.