The Aventura prototype pictured below, built in 1981/2, featured amongst its many innovations 700c tyres. The reasons for having larger wheels back then are the same ones that are making 29ers popular today – a freer rolling, smoother ride over bumps and rough terrain, with improved traction in loose dirt and mud. Supply difficulties resulted in production models featuring 650b tyres, a slightly smaller rolling diameter tyre/rim size in which Nokian also made some suitably sturdy tyres. It’s worth recalling that back then there were almost no off-road bicycle tyres available in the 26″ format, or any other size, apart from 20″ format for BMX. As Geoff relates below, but for a better supply situation, mountain biking history may have been quite different
I tried a GT 29er last year. I didn't really notice much (if any) improvement in the ability to roll over stuff or increased speed (maybe because I run 2.55 Weirwolfs) but I did notice that it felt tall and was more difficult to throw it around and carve turns. But if I were a xc racer fun/handling would take a backseat to any speed advantage I could get. But on my rides I'm in no hurry and prefer the tossability of a 26er.
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