Origin

There are no clear literary sources from which to trace the origin of the red envelope tradition. In China, during the Qin Dynasty, the elderly would thread coins with a red string. The money was called yāsuì qián (Chinese: 壓歲錢 Chinese: 压岁钱), meaning "money warding off evil spirits", and was believed to protect the elderly from sickness and death.[citation needed] The yāsuì qián was replaced by red envelopes when printing presses became more common. Red envelopes are also referred to as yāsuì qián.

got that form wikipedia.

Additional info here

i think it is a kind of way to drive the dragon away because the Spring Festival in many years ago is a dangerous creature people scared it so they use it to represent like Good Luck