We make matter as we go.We dont expand as much as we create.

The short answer is: it doesn't need to be inside anything at all.

Space is defined by the objects in it.

Maybe the universe is always the same size and all the things inside it are getting smaller and smaller, making it look from inside like it's the universe that is expanding... In that case the big bang would be more of a big gnab...

You misunderstand the the basic principle.

This reads as if you think of the universe as a bubble in a larger three-dimensional space, because your daily experience of space gives you the illusion that you could just continue to travel along a straight for a very long time (at least as a thought experiment), and then at some point reach the border of this bubble, penetrate it and reach the empty space outside of the universe. That is not so. In a global sense, the universe is all there is. Locally it looks like the three dimensional space we know, but globally it does not. Moving along in a straight line would not reach the border of the universe, because such border does not exist.

The big bang is wherever you are. you are just looking back at its effects