We present an analysis of magnetic traps for ultracold atoms based on current-carrying wires with sub-micron dimensions. We analyze the physical limitations of these conducting wires, as well as how such miniaturized magnetic traps are affected by the nearby surface due to tunneling to the surface, surface thermal noise, electron scattering within the wire, and the Casimir-Polder force. We show that wires with cross sections as small as a few tens of nanometers should enable robust operating conditions for coherent atom optics (e.g. tunneling barriers for interferometry). In particular, trap sizes on the order of the deBroglie wavelength become accessible, based solely on static magnetic fields, thereby bringing the atomchip a step closer to fulfilling its promise of a compact device for complex and accurate quantum optics with ultracold atoms.