Water is currently an intangible block in AAGRINDER.
Water doesn't flow, but it fills a space if you break a block next to it. It also cannot be picked up nor destroyed other than replacing it with other block.
It is possible to swim in it, although there is no air mechanic, so it's entirely possible to live full-time in water.
Corals will also spawn in water as their only natural environment, and decay if outside of it.
Water mechanics are planned, and they will be very similar to the water mechanics in Minecraft. This means that there will be a distinction between a water source block and flowing water block. It will be possible to create more water source blocks out of other source blocks; but most of the time, water will spread in the flowing state. While flowing, water will create persistent waterfalls and "rivers"; however, it will require a water source at the start. As soon as that source is removed, water will drain.