Place potatoes in a saucepan, cover with cold lightly-salted water, and bring to a boil over high heat. Reduce heat, cover, and simmer until fork-tender, about 30 minutes.

In a medium skillet over low heat, melt butter, add onions, and cook until golden brown, about 20 minutes. Add vinegar, salt, water, paprika, and sugar. Stir until sugar is dissolved. Taste and adjust the amount of sugar.

Slice potatoes and add to vinegar mixture, tossing to coat. Bring to a boil, and serve hot.