With custodial staking like that you bring in a whole other level of risk though, the risk of Kraken being hacked, doing a rug pull, a government messing with it, or your personal account being hacked. If that happens, you can suffer a catastrophic loss of 100%.

I know Kraken is a very reputable exchange, so the risk of such things is very low. I actually stake DOT and ETH there myself, since there are no non-custodial staking methods available for me with those coins.

But for a 0.7% difference? I'll gladly take that difference for the safety of holding my own private keys. I actually believe the risk of some bad shit happening with an exchange is more than 0.7% per year.