Preheat the oven to 325°F. Lightly butter or grease a 8"x8" baking dish.
Melt the butter in the microwave (about 35 seconds) and set aside to slightly cool. Warm the milk (we used the microwave again) to room temperature or lukewarm and set aside.
Whip the egg whites and vinegar to stiff peaks. Set aside.
Beat the egg yolks and sugar until light in color and well blended. Mix in the melted butter and the tablespoon of water and beat for about 2 minutes.
Mix in the flour until fully incorporated. Slowly beat in the milk and vanilla extract until everything is well blended.
Fold in the egg whites, 1/3 at a time. Repeat until all of the egg whites are folded in.
Pour the batter into the prepared pan and bake for 40-45 minutes or until the cake is barely jiggly in the center. Allow cake to completely cool and chill for at least 8 hours before cutting. Dust with confectioner's sugar if desired and serve with whipped cream to make it extra!