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The Ashta-Vasus were cursed by Vashishta to be born as humans because they stole cow Kamadhenu. 7 of them were spared by a quick death after birth, but Prabhasa alone would have to live a long, painful, illustrious life as Bhishma.

Many of us face suffering in life. Most of these times, we know the cause of suffering (our own karma) - whether it is clearly self-inflicted, or it comes through the disguise of others. But sometimes, we suffer additionally because don't know the cause, and wonder if it is 'Prarabdha' - an unknown consequence of something we did in one of our innumerable past lives. If we know the cause of suffering, it definitely eases our pain a bit. If we are punished for a wrong-doing, at least we'll know that we deserved it and can also avoid that mistake again.

Did Bhishma know that he was born on earth due to his stealing in previous life?

We know that Bhagavan takes avatara as Rama, Krishna and that he is fully aware of who he is, even though he may choose to hide or display it as he sees fit.

But what about other 'avataras', of devas / asuras ? Some people do know the cause e.g. Nahusha knew he had to be snake due to Agastya curse. Did Shantanu know he was born due to curse in Brahma Loka ? Was Bhima aware he was Vayu-amsha-avatara ? etc. Same goes for other characters in Ramayana/Mahabharata..

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I guess he knew it, since Karna knew it:

‘“Karna said, ‘He possessed fortitude, intelligence, valour, energy, self-control, truth, all the qualities of a hero and divine weapons. Humility, affection and pleasant speech existed in Bhishma. He was always grateful and killed those who hated brahmanas. These attributes were eternal in him, like Lakshmi in the moon. That destroyer of enemy heroes has now obtained peace and I think that all the other warriors have already been killed. Because everything in this world is assigned by action, there is nothing that is permanent. When the one who was great in his vows has been slain, who can certainly say today that the sun will rise tomorrow? He possessed the power of the Vasus. He was born from the energy of the Vasus. That lord of the earth has returned to the Vasus again. O Kurus! You should sorrow for your riches, your sons, the earth and the army.’”12

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