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Mud can be picked up or deposited via a bucket. When picked up, the player obtains a bucket of mud. A bucket of mud can also be obtained by finding a chest and opening it, as chests have a chance of having buckets of mud inside them.
When mud is placed down water will flow over the mud and if it can reach destroy the source block. When placed on regular block like dirt it creates a single source block then a 1 block flow on all sides.