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Bikini Bottom (where SpongeBob lives in a pineapple under the sea) is a fictional underwater city, but it is set beneath the ocean just off the coast of an actual island! Bikini Atoll (I wonder where the name came from?) is part of the Republic of the Marshall Islands. It is made completely of coral and surrounds a central lagoon.However, according to the show’s creator, much of Bikini Bottom itself was actually based on the city of Seattle.
(Sources: 1, 2)