Dreamons are beings that are used for evil. How a Dreamon can take over a person is unknown, but people in contact with Dream can be tested by the hunters.
A transmuted Dreamon is a person afflicted with a rare kind of Dreamon possession, where they constantly shift between their usual self and a Dreamon. The host does not remember the Dreamon's actions, but it is not yet revealed if Dreamons remember the actions of the host. The only transmuted Dreamon found on the SMP, Dream, was successfully exorcised by Tubbo and Fundy.
After discovering the existence of Dreamons, Fundy and Tubbo started a ritual involving Dream in front of the Quartz Mansion. Dream became possessed by a Dreamon, and Tubbo and Fundy started throwing eggs at Dream, who logged off the game, then logged on again to see that there was an explosion.
A sighting of what appeared like a Dreamon possession occurred around a week after the first Dreamon was sighted. Whilst Eret was building the catfe, Ponk arrived and began harassing Eret, killing the cats in the cafe and placing unneeded scaffolding in the area. After Eret killed Ponk twice, Ponk began levitating. Ponk scared Eret, and claimed that "he sold his soul for science." It is unknown whether this occurrence was actually due to the Dreamons, or if this was just a one-off bit done by Ponk.