Krakens are gargantuan sea creatures you can find in the Ocean biome. They are completely neutral and won’t attack or flee. The telltale sign of a Kraken encounter is discovering an island that doesn’t appear on the minimap.
Abyssal barnacles grow on the Kraken’s shell and can be mined with an Antler Pickaxe or better, and drop chitin. If you mine them, the Kraken will start shaking and emit a loud rumble. The Kraken will continue shaking as you remove more barnacles and eventually it will submerge.
Krakens never reappear after they sink back into the sea. The barnacles on their back are also the only source of Chitin in Valheim.