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You can make underwater sand waterfalls using an airstone and some tubing. It kicks up dust in the tank though. That picture just looks cleverly aquascaped to me though
While the more adventurous and complex DIY'ers can create the illusion of a waterfall with moving sand, most aquascapes that feature a waterfall are created with glass-wool or filter wool. It's like cotton buds pulled apart, but apparently doesn't degrade like cotton.