An industry source has told Kotaku that the next Xbox will have Blu-ray as its disc format, unlike the Xbox 360, which has DVDs, and that it will ship with Kinect 2, successor to the original Kinect motion sensor. Kinect 2 will also have its own on-board processor, a feature which was originally planned for the current Kinect.

With Blu-ray as its medium, the Xbox 720 will have the capacity of 25GB (or 50Gb with dual layered discs) on its discs- much, much more than the maximum 9GBs the Xbox 360 can afford with DVDs.

Microsoft is also implementing a system in Xbox 720 that will block it to used games, meaning that no one will be able to play used games on the console. Details on this feature are currently unknown.

Microsoft is also building a smaller controller for Xbox 720 as compared to the one that Xbox 360 uses.

Recent reports suggested that Xbox 720 will be six times as powerful as the Xbox 360.

The Xbox 720 rumours are coming in really hot and heavy now. Stay tuned, we’ll keep you updated.

According to Eurogamer’s sources, Kinect 2 is supposed to be so accurate that it can lip read, and do a lot of impressive things. While it’s logical to expect a huge leap in technological innovation, Microsoft means business here, as this could be potentially revolutionary.

“It can be cabled straight through on any number of technologies that just take phenomenally high res data straight to the main processor and straight to the main RAM and ask, what do you want to do with it?” said their source.

While this is certainly hard to believe, it isn’t impossible because such tech do exist, although, are extremely expensive.

To make it cheaper for mainstream adoption is where the main challenge lies, and I’m pretty sure Microsoft has the capabilities to accomplish that.

It also remains to be seen how their competitors, Sony and Nintendo innovate next-gen. The next Xbox is slated to launch in 2013-14, so it’s going to be a long wait till then.

Tell us what you think in the comments section below.