Place mini marshmallows and water in a microwave-safe bowl. Heat in 30-second intervals, stirring between each, until the marshmallows have completely melted into a smooth, sticky, stretchy base.

Lightly grease your working surface and hands with vegetable shortening to prevent the fondant from sticking. Have your powdered sugar ready for gradual incorporation.

Gradually add powdered sugar to the melted marshmallow mixture. Fold it in initially with a spatula, then knead with your hands. Keep adding powdered sugar until the fondant is no longer sticky but remains pliable and smooth.

If desired, knead in vanilla extract and any gel food coloring until fully blended into the fondant.

Wrap the fondant tightly in plastic wrap and place it in an airtight container. Let it rest for at least an hour to improve its texture and workability before using.