Peel and grate the potatoes. Place in a kitchen towel, and squeeze the excess moisture from the potatoes. Mix the potatoes with the egg and potato starch, then season to taste with salt and nutmeg.
Heat the oil in a pan. Portion the potato mixture into the pan, and cook for 1-2 minutes, until golden brown. Flip the potato pancakes, and cook another 1-2 minutes on the other side. Repeat the process, until none of the potato mixture is left. Drain the pancakes on paper towels. Serve with applesauce, if you'd like.