I saw people building boats with plywood and cover it with fiberglass to protect is from water demage
why most of the builders cover the outside of the boat as well as the inside? wouldnt regular oil paint be enough and protect it from small spashes from the inside?
Wooden boats require a certain kind of maintenance, and when that maintenance is skipped it can turn into "repair and rebuild" quickly. Traditional wood shipbuilding will be limited by the required knowledge of shipbuilding techniques, tools, and materials. This is now a niche subject, though still quite active in some parts of the world. It may take a lifetime to master.
Fibreglass construction comes with its own maintenance quirks, but does not rely on certain kinds of woodworking skills. That being said, maintaining and repairing glass construction does require a whole different set of skills.
As for handling those "splashes" you refer to, it depends if the splashing is fresh or salt water, and where that water ingress is!
One of the deciding factors is likely whether or not the vessel is intended for fresh or salt water use. There is an adage one hears all the time for wooden boats which states more or less that "fresh water is the enemy". A surprising amount of the waterproofing for a salt-water wooden craft is actually weatherproofing, intended to keep fresh water from entering into the vessel at all. Wood, with regular maintenance, is actually quite stable in the presence of saltwater, but fresh water left to pool or via constant exposure, will lead to rot in a very short time. For wooden boats, almost as much time and energy is spent weatherproofing the deck and deck furniture as making the hull tight!
That is, it is expected a certain amount of seepage into the bilge will happen (with most traditional construction), especially on new builds before the wood and sealant has had a chance to expand and swell. But you don't want the bilge to have significant fresh water in it, as this will lead to serious rot. Fresh water and wood are not friends compared with salt water.
Many of those beautiful planked construction boats intended for lakes and rivers were completely taken out of the water at the end of the season, and placed in a nice dry boat house. Boat houses (where watercraft were stored dry for the off season) were very common at marinas and private cottages for this reason. You absolutely cannot let a wooden laker sit at the dock for weeks or months with anything in the bilge. This goes for kayaks, canoes as well.
This is not the case for salt water craft, which will usually only be pulled out for major repairs or regular hull treatments -- not necessarily for water proofing but to remove the biological cruft that keeps the boat from performing adequately.
Fibreglass offers all kinds of advantages for cheaper and faster construction. However, metal and glass construction pretty much replaced all wood construction for freshwater use very early. This was partially due to accessibility and durability of the materials (especially if your maintenance schedule is lax) and because wooden construction needs more seasonal maintenance, especially on fresh water.
Of course, small craft like canoes and kayaks are designed to be pulled out of the water and stored upside down, ideally out of the weather, in all cases. Glass and metal canoes and kayaks can be abused and ignored much more.
But a wooden canoe may actually last longer stored in the sun upside down than a glass canoe because the UV light may damage some glass composite materials more than, say, cedar. It is, as they say, horses for courses.
I'm not an expert on wooden boats, but wood starts to rot quickly when it gets wet and is exposed to air at the same time. It would not be possible to keep wood dry that is only protected against moisture from the outside. You'll always get some water inside the boat, either from waves or from rain - or just because of the high humidity near lakes or the sea.
So to prevent your boat from starting to rot, you would need to make sure it is really dried out after each use. This is impractical, so the wood is fully covered in fiberglass and gelcoat, so it stays dry. A boat built of only wood would likely even be easier to dry - however it needs the attention and maintenance of a wooden boat, which is considerably higher than anything built of or with GRP (and the reason why wood is rarely used for boatbuilding any more).
Note that moisture isn't even only an issue with a wooden core. Even boats fully built with fiberglass may show what is called "osmosis", where water (vapor) passes trough the protective outer gelcoat layer and starts a kind of rotting process in the fiberglass and it's surrounding epoxy or polyester resin.
