Adjust oven rack to middle position and preheat oven to 400°F. Arrange half of bacon on a rimmed baking sheet and cook in oven until crisp and well browned, about 15 minutes. Drain on paper towels.
2. Meanwhile, place cherry peppers in the work bowl of a food processor. Pulse until finely chopped, 8 to 10 short pulses. Cut remaining half of bacon into 1/2-inch pieces. Heat bacon in a 12-inch non-stick or cast iron skillet over medium heat. Cook, stirring, until crisp, about 8 minutes. Add sugar and chopped cherry peppers and their juices. Cook until juices are mostly evaporated and pepper-bacon mixture has a chunky, relish-like texture, about 8 minutes. Transfer to a bowl and set aside.