Venice, often called the “Floating City” was built on a series of more than 100 small islands in a lagoon in the Adriatic Sea. Twice every day the water in the lagoon drains away from the city?s 124 islands and fills up again with fresh seawater. This constant movement of water gives Venice its unique, ethereal character, but it also makes city maintenance a bear to handle. The city’s construction began in the 5th century AD after the fall of the Roman Empire and it was initially built as a refuge for people fleeing from invading barbarians.

Buildings in Venice are built over 10,000,000 close-together, 60ft-long, water-resistant tree trunks that were chopped down 500 years ago

The city’s unique geography required innovative engineering solutions to create stable foundations for its buildings. Wooden piles were driven into the marshy ground, far below the weak and unstable topsoil to a layer of harder clay below, which held the piles in place. Two horizontal layers of wood were then placed on top of the pilings, followed by a layer of limestone and then the buildings went on top of those. They placed a lot of these pilings down; for instance, the Rialto bridge is supported by somewhere in the region of 12,000 pilings.
The wood went through soft silt and dirt to a layer of hard clay that was strong enough to support buildings on top

As for the sinking, yes, Venice is indeed sinking, but the situation is more accurately described ...