To prepare the hollandaise, place the butter in a small saucepan over medium-low heat and cook for 5 minutes or until completely melted. Carefully skim the solids off of the top with a spoon; discard solids. Slowly pour remaining butter out of the pan into a small bowl, leaving remaining solids in pan. Set the clarified butter aside.
Combine the water and egg yolks in a small saucepan, stirring with a whisk until foamy. Place the pan over low heat, stirring constantly until the mixture thickens slightly. Gradually add ¼ cup of the clarified butter, about 1 tablespoon at a time, stirring with a whisk until each addition is incorporated and mixture is thick. Reserve the remaining clarified butter for another use.
Stir the lemon juice and 1⁄8 teaspoon of salt into the butter mixture, whisking until blended. Remove pan from heat.