The Polkadot network will have a phased roll-out plan, with important milestones toward decentralization marking each phase. Until Sudo is removed, the chain will be considered a chain candidate (CC), and not fully launched. During the CC phase, the chain may reset and change dramatically due to critical bugs, important changes in the code, or other circumstances.
The PoA Launch
Web3 Foundation will launch Polkadot in Proof of Authority (PoA) mode. Chain functionality will be limited to claiming and staking DOT tokens. For those who plan to run validators, they can also set their session keys.
During this time, governance is restricted to the Sudo key, which will be held by Web3 Foundation to issue the commands and upgrades necessary to complete the launch process. There are no inflation or rewards during this period.
The purpose of PoA is to ensure the network starts properly and allow community validators to claim their tokens, set up their infrastructure, and start receiving nominations.
Nominated Proof of Stake
Once Web3 Foundation is confident in the stability of the network and there are a sufficient number of validator intentions, Web3 Foundation will use Sudo - a superuser account with access to governance functions - to initiate the first validator election. This election will transition the network from PoA into its second phase, Nominated Proof of Stake (NPoS), where the network is secured by the economic stake that is bonded to the validators by the nominators and the validators themselves.
Time-wise, the transition to Proof of Stake will largely depend on when a sufficient number of validators are ready to take over the security of the network. This transition will probably require at least 100 well backed validators.
After the chain has been running well with a sufficiently large validator set, the Sudo key will issue a runtime upgrade that enables the suite of governance modules in Polkadot; namely, the modules to enable a Council, a Technical Committee, and public referenda. Once a Council and governance tools are in place, the public has the avenues to effect changes in the system.
Removal of Sudo
A runtime upgrade — either via governance processes or from Sudo itself — will remove the Sudo module from the runtime.
From this point, the network is entirely in the hands of the token holders and no longer under control of any centralized authority. Without Sudo, the chain will no longer be a candidate (CC) and will be a live, decentralized network.
To enable balance transfers, the community will have to come together and make a public proposal for a runtime upgrade that would lift the restriction on balance transfers. Once the proposal passes referendum, there will be an enactment period after which the change will automatically come into effect.
Once balance transfers are enabled, Polkadot can start to open up its core functionality, like parachain slot auctions, parathreads, and cross-chain message passing. These upgrades will require runtime upgrades that will pass through Polkadot's normal governance processes. The core functionality does not have to be unlocked sequentially — several features can be unlocked with a single proposal.