Cake: Melt chocolate in water in saucepan over very low heat, stirring constantly until smooth. Add 1/2 cup of the sugar; cook and stir 2 minutes longer. Cool. Mix flour, baking soda and salt; set aside. Cream butter. Gradually beat in remaining 1-1/4 cups sugar and continue beating until light and fluffy. Add eggs, one at a time, beating thoroughly after each. Alternately add flour mixture with milk, beating after each addition until smooth. Blend in vanilla extract and chocolate mixture. Pour into 2 greased and floured 9-inch layers pans. Bake at 350 °For 30 to 35 minutes, or until cake tester inserted in center comes out clean. Cool in pans 10 minutes. Remove from pans and finish cooling on racks. Spread frosting between layers and over top and sides. Garnish with chopped nuts, if desired.

Hungarian Chocolate Frosting: Melt chocolate in saucepan over very low heat, stirring constantly until smooth. Pour into mixer bowl. Add sugar and water, all at once; blend well. Add butter, 1 tablespoon at a time, beating thoroughly after each addition. (If frosting is to soft to spread, place bowl in large bowl of cold water and stir until of spreading consistency.) Make about 2-2/3 cups.