Everything is OK in your configuration, if you are only having production environment and not configured any sandbox yet.
If not configured any sandbox, you can search for Sandbox Environment and click on create button to create a sandbox environment:
It will take few minutes and create a new sandbox environment for you.
Another way to create a sandbox or check already available sandbox for you, if you are having admin rights then you will able to see list of environments by clicking on Admin Center hyperlink it is available under settings gear:
Following is a screenshot for admin center page:
If you create a new sandbox from this page then you can give any name to your sandbox environment.
But you created a sandbox from the production environment Business Central UI after searching, then for sure here a environment with name Sandbox will create. If Sandbox is created then your code is correct you don't need to do anything, just authenticate your VSCode while downloading the symbol and you are good to go.
But still for your reference and to confirm that your configuration is right let's see another Business Central Admin page and launch.json file that is same like your launch.json:
For development you can use any sandbox environment in launch.json (based on above screenshot e.g.: inversion20, new, sandbox)
In below you can see I have used Sandbox.
For tenant id: I want to say it is not mandatory if you are authenticating yourself using your user account and that user account is not a having access to multiple AAD.
I hope all this explanation will help you to understand what you need to do.
