Grate the potatoes and onion on the small holes of a box grater. Season lightly with salt and let stand for about 15 minutes letting the potatoes release water.
Squeeze out excess water from the potatoes (either by hand or using a clean kitchen towel) reserving the liquid in a bowl.
Let the liquid stand for 5 minutes then discard the water at the top. You should see a thick white paste at the bottom - this is potato starch. You will need it for the potato pancake batter.
Add the grated and drained potatoes, reserved potato starch, egg, and nutmeg to a large bowl. Season the batter with salt and pepper and stir with a spoon until combined.
Pour a couple of tablespoons of oil into a frying pan over medium or medium-high heat (it depends on how powerful your stovetop is). When your pan is hot enough, scoop about 1 heaped tablespoon of batter per pancake, flatten each pancake into rounds about 1/4 – 1/3 inch (1/2 – 3/4 cm) thick. Cook until golden then flip over and cook on the other side until golden. Don't cook them over too high heat or they will be browned on the outside but raw in the middle. Transfer to a plate lined with paper towels to drain the excess fat (if you want your pancakes more crispy, drain them on a wire rack).
Serve with sour cream and/or applesauce.
Enjoy!