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Yep, you use the paper towel to prevent them eating the shavings. I put in the disclaimer because I read about a person who has said that one of their chicks ate the paper towel. Edited: I think that a chick eating the paper towel would be rare. They are more likely to eat the shaving. Edited...

I keep my newly hatched chicks on pine chips/shavings covered by paper towels for the first two weeks and then just on the chips/shavings (no paper towels). Edited: Make sure they don't eat the paper towels.