Preheat oven to 350°. Cream butter and sugar until light and fluffy, 5-7 minutes. Add eggs, 1 at a time, beating well after each addition. Beat in food coloring, vinegar and vanilla. In another bowl, whisk together flour, cocoa, baking soda and salt; add to creamed mixture alternately with buttermilk, beating well after each addition.
Pour into 2 greased and floured 9-in. round baking pans. Bake until a toothpick inserted in the center comes out clean, 20-25 minutes. Cool layers 10 minutes before removing from pans to wire racks to cool completely.
For frosting, combine water and cornstarch in a small saucepan over medium heat. Stir until thickened and opaque, 2-3 minutes. Cool to room temperature. Beat butter and vanilla until light and fluffy. Beat in cornstarch mixture. Gradually add confectioners’ sugar; beat until light and fluffy. Spread between layers and over top and side of cake.