Don't worry you can use your USB pen drive as you storage device for your Xbox. For this to work we recommend you to buy a 8gb above pendrive so that you can install games on it but don't go for the 64gb ones because Xbox supports only upto 32gb so think before you buy your pendrive.
First insert the pendrive into your xbox . after this go to the settings and select storage and you will be prompt to configure the pendrive after the configuration you will see that .5gb occupied this is because Xbox reserves 512 mb of storage for its contents so don't worry.
Note:- you have to buy a pen drive which USB 2/3 which has a write speed of 4mbps and read speed of 15mbps then only you can play you installed games lag free