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Differences between a crypto exchange and a crypto wallet service
Kraken is an exchange providing clients the ability to deposit funds to our corporate wallet for safekeeping while the funds are being exchanged or used for trading or staking*. We also provide a self-custodial wallet, Kraken Wallet, that enables you to securely manage your cryptocurrencies and interact with decentralized applications (dApps) on the Web3 ecosystem. 
For more information on the differences between Kraken Exchange and Kraken Wallet visit: What is the difference between Kraken Wallet and Kraken Exchange?
As with most exchanges, funds sent to deposit addresses are moved to cold storage and hot wallets. Withdrawals are handled by the hot wallet and not the deposit address; the sending address for withdrawals will be different than the deposit address.

Key differences:

1. Deposits
If you deposit to a Kraken address that is not listed on your deposit page, it will not be possible for us to return the funds. It is your responsibility to ensure that the address that you deposit to is listed on your deposit page and that you are sending the correct cryptocurrency to it.
3. Withdrawals & fees
Transaction fees for withdrawals are automatically set by our system and cannot be changed. While we do our best to include a fee so that transactions will be confirmed within a reasonable amount of time, we cannot guarantee it due to the unpredictable nature of blockchain congestion.
4. Withdrawals & smart contracts
Do not attempt to withdraw digital assets from Kraken if ownership of the sending address is relevant to the transaction.
For example, if you're depositing into an Initial Coin Offering (ICO) address, Kraken's hot wallet will be the depositor and not your personal Kraken deposit address. You will not be able to receive those ICO tokens.
5. Withdrawals & returns
If you withdraw digital assets from Kraken to a third party that returns the withdrawal to the address from which it was sent, those assets will not be recoverable by Kraken. Please take the relevant steps to prevent your funds from being sent to addresses that are not listed on the deposit page of your account.
6. Kraken-to-Kraken transfers
You will not be able to send cryptocurrencies from one Kraken account to another.

What wallets are there?

We now provide a self-custodial wallet, Kraken Wallet, that enables you to securely manage your cryptocurrencies and interact with decentralized applications (dApps) on the Web3 ecosystem. 
Ledger and Trezor are popular makers of hardware wallets. You can visit the websites below to learn more:
*An overview of eligibility criteria (including geographic restrictions) for On-chain staking can be found here.