"any deterministic function". At the extreme, the exchange rate can therefore be dynamically set through time using some Oracle as an input. In theory.
Of course, but these rules are hard coded into the sidechain so one knows what to expect before moving his BTC there.
My point is I don't believe the sidechain can magically change its rule and dispossess everyone of their BTC. Unless there existed a backdoor which I expect anyway would be identified after careful review of the code.