Recent multi-wavelength observations of 3C454.3, in particular during its giant outburst in 2005, put severe constraints on the location of the blazar zone, its dissipative nature, and high energy radiation mechanisms. As the optical, X-ray, and mill
imeter light-curves indicate, significant fraction of the jet energy must be released in the vicinity of the millimeter-photosphere, i.e. at distances where, due to the lateral expansion, the jet becomes transparent at millimeter wavelengths. We conclude that this region is located at ~10 parsecs, the distance coinciding with the location of the hot dust region. This location is consistent with the high amplitude variations observed on ~10 day time scale, provided the Lorentz factor of a jet is ~20. We argue that dissipation is driven by reconfinement shock and demonstrate that X-rays and gamma-rays are likely to be produced via inverse Compton scattering of near/mid IR photons emitted by the hot dust. We also infer that the largest gamma-to-synchrotron luminosity ratio ever recorded in this object - having taken place during its lowest luminosity states - can be simply due to weaker magnetic fields carried by a less powerful jet.
