Place the sugar and 2/3 cup water in a medium saucepan. Bring the sugar mixture to a boil over medium high heat, occasionally swirling the pan to evenly distribute the heat. Lower the heat to medium and place a lid on the pan.
Gently clip a candy thermometer to the pan, ensuring the thermometer does not touch the bottom of the pan. Heat the sugar to 245 degrees F, or firm-ball stage.
While the sugar syrup is cooking combine the remaining half cup of water and gelatin in the mixing bowl of a stand mixer, stirring to combine. Allow this to sit for 10 minutes to bloom.
Once the sugar syrup reaches 245 degrees F move the pan off the burner and allow the bubbles to subside. In the stand mixer with a whisk attachment add the sugar syrup mixture slowly over low speed, add the salt and increase the speed to medium.
Whisk for 6 minutes or until the mixture is fluffy, glossy and tripled in volume. Add the vanilla extract and whisk for 1 more minute.
Grease an 8x8 pan with cooking spray, butter or coconut oil. Spread the marshmallow mixture into the pan and allow the marshmallows to rest for 5 hours (this allows the marshmallows to properly cure).
In a medium bowl combine powdered sugar and cornstarch. Cut the marshmallows into your desired size ( 2 inch x 2 inch for large marshmallows or 1 inch x 1 inch for smaller marshmallows) and toss the marshmallows in the powdered sugar mixture to coat. Store in an airtight container for up to 1 week.