Gatsby, traditionally known as a static site generator, can be used to create dynamic web applications by integrating with services like Netlify Functions and Netlify Identity. This approach allows developers to incrementally add server-side functionality and user authentication to their Gatsby sites without transitioning to a more complex server environment. By leveraging serverless functions, developers can incorporate dynamic elements that require server-side logic, such as accessing third-party APIs or databases, while maintaining the benefits of a static site. Gatsby’s ability to "rehydrate" the DOM enables the construction of "Static Progressive Web Apps" using React, which offers significant flexibility compared to older static site generators. While this setup can make a site more resource-intensive, it provides a scalable solution for building dynamic, authenticated applications. Netlify Identity allows for easy integration of user authentication, supporting social sign-ons and role-based access control. This combination of tools makes Gatsby an ideal choice for hackathons or projects where time and resources are limited, as it enables developers to quickly transform static sites into fully-fledged web applications.