You're thinking a bit closed minded. There are other ways to tackle the problem depending on how user friendly or user unfriendly you want the console to be. For example:
1. Converting to cloud could require users to trade in the physical disk at a local store for a digital CD key. A pain for users but by making this a known requirement up front, users won't be able to complain about it and it may convince users who are on the fence to just get the digital copy from the start.
2. Require all games to have a CD Key (acts as the same key for converting to cloud) and a small footprint installable component. Tell users that you don't need an internet connection to validate but if you do connect to the internet, the Xbox One will periodically "phone home" and check to see if your CD keys are legitimate. It won't stop sharing the physical copy after converting to cloud, but it would make it much more of a hassle and prevent multiplayer games from being shared easily. Bonus for users who are converting - the digital version of the game can be installed via the disk so they don't have to wait to download the game to convert it to the cloud. This would also make reinstalling much faster so long as users keep the physical copy.
There are many other possibilities that have been mentioned already so I'll stop here. Just note that this isn't an either or situation. There is a lot of flexibility here.
You're still thinking inside the box a little. Gamecube used a variety of patented format cds and encryption keys stored in a small area of the cd for their copy protection. [1]
Or, you know, just turn off the always-online or check-in-each-24h requirement and just lock down the hardware from sideloading games onto it. Even without that, something tells me people would still buy games.
1. Converting to cloud could require users to trade in the physical disk at a local store for a digital CD key. A pain for users but by making this a known requirement up front, users won't be able to complain about it and it may convince users who are on the fence to just get the digital copy from the start.
2. Require all games to have a CD Key (acts as the same key for converting to cloud) and a small footprint installable component. Tell users that you don't need an internet connection to validate but if you do connect to the internet, the Xbox One will periodically "phone home" and check to see if your CD keys are legitimate. It won't stop sharing the physical copy after converting to cloud, but it would make it much more of a hassle and prevent multiplayer games from being shared easily. Bonus for users who are converting - the digital version of the game can be installed via the disk so they don't have to wait to download the game to convert it to the cloud. This would also make reinstalling much faster so long as users keep the physical copy.
There are many other possibilities that have been mentioned already so I'll stop here. Just note that this isn't an either or situation. There is a lot of flexibility here.