For a more tutorialized explanation of the content described in this article, see Liquids on the Hytale Community Wiki.
Fluids are special blocks that can flow over other blocks. Fluids in Hytale include water and lava.
Certain blocks can be placed in fluids and will be submerged inside the fluid. Some blocks such as coral and reeds can generate naturally submerged in water.
The option that declares whether a certain block is submersible or not is found inside the configuration file for that block. Any block can be configured to submerge in any fluid.