In a large pot or Dutch oven over medium heat, cook the chopped bacon until crisp, about 6–8 minutes. Transfer to a paper towel–lined plate and pour off all but 2 tablespoons of drippings.

Add butter to the pot, then stir in the onion and cook until soft and translucent, about 4–5 minutes. Add garlic and cook for 30 seconds until fragrant.

Sprinkle flour over the onions and stir for 1 minute to cook off the raw taste. It should look pasty.

Whisk in the broth gradually to avoid lumps, then add the milk. Bring to a gentle simmer.

Stir in the diced potatoes, salt, pepper, smoked paprika, and thyme. Cover partially and simmer on medium-low for 15–20 minutes, stirring occasionally, until the potatoes are tender.

For extra creaminess, mash some potatoes against the pot with a spoon, or use an immersion blender briefly. Keep some chunks for texture.

Reduce heat to low. Stir in sour cream and 1 cup cheddar until melted and smooth. Taste and adjust salt and pepper.

Ladle into bowls and top with bacon, remaining cheddar, green onions, and optional garnishes. Serve warm.