Bit of both can happen. Once the nitrogen cycle is completed and the sand bed begins producing nitrogen gas, if there is any cyanobacteria slime on the bed, it can accumulate nitrogen gas as bubbles and you get bubbly cyano slime. If there is no cyano, you will just see the bubbles "fizz" into the water.
But once everything is stabilized most of the nitrogen will just diffuse into the water, you won't even see it, and it will diffuse back out of the water at the surface into the air.
Great to watch all the stages in our new tanks, as it all starts coming together, yes!