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The young Reds scrapped out a deserved goalless draw before goalkeeper Harvey Davies saved twice in the shoot-out to secure an 8-7 triumph on spot kicks.
The draw was only the fourth time in 18 games in the competition that Liverpool have avoided defeat after 90 minutes, although it wasn't enough to prevent them from being eliminated.
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And here the ECHO runs the rule over the Reds after their interest in the competition was ended for another year.
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Harvey Davies 9
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Claimed a few high balls early on and comfortable with the ball at his feet, and good saves second half from Beesley and Bondo.
The hero in the penalty shoot-out.
Lucas Pitt 7
The 18-year-old right-back was quietly confident on his first start in the competition and not overawed by the more physical Blackpool attack.
Struck one shot over second half and good penalty in shoot-out.
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Jay Spearing 7
Playing as centre-back, the 35-year-old cleared off line first half and was only caught out once by the Blackpool attack.
Subbed.
Lee Jonas 6
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One mishit clearance aside, composed defending from the 20-year-old who has been an ever-present in Premier League 2 this season.
James Norris 7
Defended well on the left flank and willing to supplement both the midfield and forward wing whenever he could.
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Tyler Morton 6
Took a short while to settle before imposing himself in midfield and dragged one shot wide first half.
Subbed.
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Tom Hill 7
The captain was off target with one effort before being denied by Blackpool goalkeeper Tyrer in each half.
Subbed.
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Keyrol Figueroa (for Cannonier 71) 6
Thwarted by Blackpool goalkeeper Tyrer when clean through having scored the previous day against Bayer Leverkusen in the UEFA Youth League.
Oliver O'Connor (for Kelly 85)
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Minutes for the teenager.
Luca Furnell-Gill (for Spearing 85)
Filled in for the injured veteran.