Microwave the Marshmallows and Water - In a microwave-safe bowl, add the marshmallows and two teaspoons of water. Microwave in 30 seconds intervals, stirring after each time. Continue microwaving until melted, which will be approximately 2-2 1/2 minutes.
Add in Powdered Sugar - Add 3/4 of the powdered sugar to the melted marshmallows in a large bowl. Carefully fold the powdered sugar into the marshmallows using a wooden spoon. Add in 1/2-1 a teaspoon of CMC or Tylose (helps the fondant so it hardens up).
Knead the Fondant - Generously grease a clean working space in your kitchen with shortening. Cover your hands in shortening and turn the marshmallow fondant onto your work surface. Knead it as you would dough, adding the additional powdered sugar as you go.
If the fondant begins to tear, add in more water. Continue to knead for several minutes until it is smooth and flexible.
Roll Out Fondant - Roll out the fondant into thin sheets. Rolling it out thin will help it harden quicker.
Grease plastic wrap with vegetable shortening and cover the fondant with it then place in an airtight container. Let the fondant sit overnight, or up to a week, at room temperature before using.
By allowing it to sit at least overnight, the texture will firm up. This will make it easier to use than if you were to use it right after making it.
Add Fondant to Cake - Add the rolled fondant to your cake, smoothing it out as you go. If it is still too soft, use a fan or blow dryer to help harden it. Trim off any excess fondant from your cake.