This really seems to miss the point of the simulation hypothesis. The simulators wouldn't need to simulate every atom on the planet. They argue that the whole planet would need to be simulated at a certain resolution in order to be compatible with the body of existing subatomic experiments that have been done.
But this misses the point and the true abilities of the simulators of a virtual world. The whole world could be simulated at the macroscopic level, only what is needed for human perception. Then, any time some experiment probed the microscopic or subatomic world, a local fine grid simulation could be spun up in that local area to simulate what results that world would look like. Bacteria don't actively exist everywhere - just the effects they generate on humans, plants, and animals. But if you take some pond water and look at it under a microscope, the minigame for visual microscopy is pulled up, revealing various microscopic organisms.
And the system doesn't even need to be perfect. Has the simulation-scaling code screwed up, and the simulated humans received erroneous results, proving they live in a simulation? No problem. Just pause the simulation, adjust the code to prevent the error, and restore the simulation to an older backup.
This paper was written by physicists. So, understandably, they look at it through a physics lens. But really they should be looking at it more from a computer game designer's perspective.