/diy/ - Do It Yourself

My grandpa has gifted me his old hunting cabin. It was built in the 40s and has no insulation at all. The exterior siding is vertical tongue and groove. The walls are just studs. No drywall or interior covering. Picture semi-related from Google.

Back in the 90s, my uncle tried to insulate it with fiberglass bats and drywall. After a few years, the insulation got moldy and was ripped out. I was told this was because there was no barrier or air gap between the exterior siding and the insulation. The building is weather tight and has no leaks. How can I insulate the place on the cheap and not end up with the same problem? Was that really the problem?