A paraxial solution to the coaxial holographic storage algorithm is proposed based on the scalar diffraction theory and a VOHIL model (volume hologram being an integrator of the lights emitted from elementary light sources), which can give insight into the optical characteristics of the collinear holographic storage system in an effective way, including the point spread function and shift selectivity. The paraxial solution shows that the reference pattern is the key issue in the point spread function. Thus, the bit error rate of the system can be improved by changing the reference pattern. The proposed solution will be useful in the design of a new reference pattern to perform a high-quality readout pattern in the coaxial holographic storage system.