Electronically the chips run on DC. I have read that DCC systems put out 16 to 24 AC to the track. This is so a decoder can activate an AC accessory. O scale just has larger power supplies to operate the larger motors (amps). Whatever system you have you have to install the decoder per manufacturer's instruction. If a decoder runs off the track it has a bridge rectifier and power amplifier to convert AC to specific DC voltage to run the circuitry.
Lionel Legacy does have a converter to run standard engines to activate e units. I don't know any details.
July Issue classic toy trains
The DCC signal is a square wave AC command signal combined with the DC track power. Decoders will not work with AC power because they are digital devices, which require DC. I think Lionel makes a command control system that works with AC power, but it is not DCC as defined by the NMRA, and NMRA compliant decoders will not work with it.
You could use a bridge rectifier to convert the engine's AC motor to DC, and then use a DCC system and decoders designed for O two-rail use. Might be easier to go with the Lionel system.
You might get better info if you also posted this in the Classic Toy Trains forum.