What you need:
4 cups of Mini Marshmallows (About 1/2 of a 16 oz bag)
4 cups of powdered sugar (About 1 pound) plus a little extra for dusting
2 tablespoons cold water
What to do:
Place the mini marshmallows and the water in a large microwave-safe bowl.
Microwave on high for 1 minute, until the marshmallows are puffy.
Stir the marshmallows with a rubber spatula until they are melted and smooth.
(if there are some that are unmelted, return to the microwave for 30seconds)
Add the powdered sugar and begin to stir with the spatula.
Stir until everything is mixed or to the point where it is impossible to stir it anymore.
Scrape the fondant out onto a workspace that has been dusted with powdered sugar.
The fondant will be sticky and lumpy, with lots of sugar that has not been incorporated yet.
Dust your hands with powdered sugar, and begin to knead the fondant mixture. You'll need to work the sugar into the marshmallow with your hands. This will take a little time. Just keep kneading it until it is combined and looks like fondant. It will become smooth and loose all the "stickiness" (add more sugar if necessary)
Roll into a ball, and now it's ready to use.